US:
- The Fed left interest rates unchanged as
expected. - The macroeconomic projections were revised higher
as the economy showed much stronger resilience than expected and the Dot Plot
showed that the majority of members still expects another rate hike by the end
of the year with less rate cuts in 2024. - Fed Chair Powell
reaffirmed their data dependency but added that they will proceed carefully as
they are trying to find the optimal level of rates. Powell also added that the
soft landing is not the base case at the moment, although they are aiming for
it. - The latest US Core PCE
came
in line with expectations with disinflation continuing steady. - The labour market
displayed signs of softening although it remains fairly solid as seen also last
week with a strong beat in Jobless Claims. - The ISM Manufacturing PMI beat
expectations yesterday in another sign that the US economy remains resilient. - The market doesn’t expect the Fed to hike again at
the moment.
EU:
- The ECB hiked by 25 bps at the
last meeting and added a line in the statement that hinted to the end of the
tightening cycle. - President Lagarde didn’t push back against the idea
of them having reached already the terminal rate and highlighted the slowdown
in Eurozone economy. - The Eurozone CPI missed
across the board last week supporting the ECB’s stance. - The labour market remains
very tight with the unemployment rate hovering at record low levels. - Overall, the economic data lately has been showing
signs of fast deterioration in the economy. - The majority of ECB members is leaning towards
keeping rates higher for longer now. - The market doesn’t expect the ECB to hike anymore.
EURUSD Technical Analysis –
Daily Timeframe
On the daily chart, we can see that the EURUSD pair
bounced on the key 1.05 support but fell
below it soon after as the US data continues to surprise to the upside while
the Eurozone data keeps on weakening. The trend is undoubtedly bearish for the
pair as the price continues to print lower lows and lower highs with the moving averages being
crossed to the downside, but from a risk management perspective, the sellers
would be better off shorting again from the downward trendline where
there’s also the confluence with the
red 21 moving average.
EURUSD Technical Analysis –
4 hour Timeframe
On the 4 hour chart, we can see that the latest leg
lower is diverging with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we might see a pullback into the downward trendline
where we can find the confluence with the previous support turned resistance and the
38.2% Fibonacci retracement level.
That would be a great place where the sellers are likely to step in with a
defined risk above the trendline to target the 1.02 handle. The buyers, on the
other hand, will need the price to break above the trendline to turn the trend
around and position for higher highs.
EURUSD Technical Analysis –
1 hour Timeframe
On the 1 hour chart, we can see that we
have a minor resistance around the 1.05 handle where we can find the confluence
with the 38.2% Fibonacci retracement level of the latest selloff and the
previous support turned resistance. That’s where the sellers are likely to pile
in with a defined risk above the resistance to target new lower lows. The
buyers, on the other hand, will want to see the price breaking above the
resistance to position for a rally into the resistance zone around the 1.0630
level.
Upcoming Events
This week we have many key economic releases that will
culminate in the US NFP report on Friday. Today, we will have the US Job
Openings data which led to a strong rally the last time as the big miss made
Treasury yields to fall due to less labour market tightness and less hawkish
Fed expectations. Tomorrow, it will be the time for the ADP report and the ISM
Services PMI. On Thursday, we will see the Jobless Claims data, which continues
to show a solid labour market. Finally on Friday, it will be the time for the
NFP report which is the only one the Fed will see before its next rate
decision.
This article was written by FL Contributors at www.forexlive.com. Source