Fundamental
Overview
The USD has been stronger
across the board since the hawkish turn from Fed Chair Powell at the last FOMC
press conference. The repricing in interest rate expectations acted as a
tailwind for the greenback as Treasury yields continued to push higher.
Yesterday, we got a couple
of strong US data. The US ADP beat forecasts (although that was expected)
and the ISM Services PMI came in much better than expected
with the price index pushing into a new cycle high.
Despite the strong data,
the greenback failed to extend the rally. This is generally a signal of a
short-term top with the market needing more to keep the trend going. In fact,
the market pricing is now showing a 60% probability of a December cut, which is
just right. The data in December will probably have the final say and hopefully
we will get an NFP and CPI report before the next FOMC decision.
On the EUR side, nothing
has changed fundamentally. The ECB decision last week didn’t offer anything new
and kept everything unchanged. ECB policymakers continue to repeat that the
current policy is appropriate and that they won’t respond to a small or
shot-term deviation from their 2% target. The recent Eurozone data has been
supporting the central bank stance as PMIs showed a rebound in economic
activity and core inflation remained at 2.4% Y/Y.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD broke below the key support zone around the 1.1573 level
opening the door for a drop into the 1.1392 level next. From a risk management
perspective, the sellers will have a better risk to reward setup around the
1.1573 level and the major downward trendline. The buyers, on the other hand,
will look for an upside breakout to target a rally back into the 1.18 handle
next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a minor resistance around the 1.1542 level. That’s where we
can expect the sellers to step in with a defined risk above the resistance to
position for a drop into new lows. The buyers, on the other hand, will look for
a break higher to extend the pullback into the major trendline.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support around the
1.1497 level. If we get a pullback into the support, we can expect the buyers
to step in with a defined risk below it to position for a rally into the major trendline.
The sellers, on the other hand, will look for a break lower to pile in and
target a drop into new lows. The red lines define average daily range for today.
Upcoming
Catalysts
Tomorrow we conclude the week with the US University of Michigan Consumer
Sentiment report.
This article was written by Giuseppe Dellamotta at investinglive.com.