Fundamental Overview

The USD has been generally under pressure since the benign US CPI report last week as the hawkish expectations subsided and the market switched its focus from inflation back to growth. This triggered a positive risk sentiment which is generally negative for the greenback and benefited the other major currencies.

The EUR, on the other hand, has been gaining ground mostly because of the US Dollar softness amid positive risk sentiment. One thing to watch will be the Eurozone wage growth data tomorrow as that might shape market’s expectations for rate cuts beyond June.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis

On the daily chart, we can see that EURUSD rallied into the key 1.09 resistance following the US CPI release and got stuck in a consolidation ever since. The market is waiting for a catalyst to push the price in either direction, but for now the bias remains bullish. A break above the 1.09 handle should see the buyers taking the pair into the 1.10 handle next.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see that we have a good support around the 1.0830 level where we can find the confluence of the trendline and the 38.2% Fibonacci retracement level. This is where we can expect the buyers to step in with a defined risk below the trendline to position for a break above the resistance with a good risk to reward setup.

The sellers, on the other hand, will want to see the price breaking lower to invalidate the bullish setup and position for a drop into the 1.0727 support.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see more clearly the rangebound price action since the US CPI rally. We have the support zone around the 1.0830 level and the resistance zone around the 1.09 level. A breakout on either side should see the momentum increasing in the direction of the breakout.

It’s unlikely that we will get a breakout today though as the average daily range limits are basically right at the support and resistance levels and we don’t have major economic releases that could trigger a strong move.

Upcoming Catalysts

Today we have the FOMC Minutes late in the day although it’s unlikely to be market moving. Tomorrow, we will get the Eurozone negotiated wage growth for Q1, the Eurozone and US PMIs, and the latest US Jobless Claims figures.