Fundamental
Overview
The USD weakened across the
board on the Fed’s decision but eventually erased all the losses and increased
the gains as traders digested all the information and realised the projected
rate path was more hawkish than market’s pricing.
In fact, the dot plot
showed that the FOMC projected two more rate cuts for 2025 by a narrow
majority, with the rest of officials expecting just one more or even none.
Moreover, the Fed projected just one cut in 2026 compared to three that the
market was pricing before the decision.
Fed Chair Powell then
labelled the rate cut as a “risk management” action given the weakening in the
labour market data. But overall, he sounded pretty neutral even though he
understandably placed more emphasis on the labour market given the two consecutive
soft NFP reports.
The day after the FOMC
decision, we got solid US jobless claims report, and the greenback increased
the gains further. Looking forward, it’s going to be all about the data. Strong
data will likely trigger a hawkish repricing in interest rates expectations and
support the greenback. On the other hand, weak data will likely continue to
weigh on it.
On the EUR side, the ECB
left interest rates unchanged at the last meeting as widely expected with
limited forward guidance other than the usual data-dependent approach. President
Lagarde made it pretty clear that the central bank finished cutting rates after
she said that growth risks are balanced and the disinflationary process was
over. The market sees just 4 bps of easing by year-end and 11 bps in total by
the end of 2026.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD probed above the 2025 high but eventually erased all the gains
as the US dollar strengthened across the board following the Fed’s decision.
The price is bouncing from the upward trendline that is defining the bullish
momentum. The buyers will likely continue to lean on the trendline to keep
pushing into new highs, while the sellers will look for a break lower to target
the 1.16 handle next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the recent price action although there’s not much else we can
add here. The buyers will look for dip-buying opportunities around the
trendline, while the sellers will wait for a breakout to target a drop into the
1.16 support.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance zone around
the 1.1790 level. If the price gets there, we can expect the sellers to step in
with a defined risk above the resistance to position for a drop into the
trendline targeting a breakout. The buyers, on the other hand, will look for a
break higher to increase the bullish bets into new highs. The red lines define
the average daily range for today.
Upcoming
Catalysts
Tomorrow we have the Eurozone and the US
Flash PMIs, as well as Fed Chair Powell speaking. On Thursday, we get the
latest US Jobless Claims figures. On Friday, we conclude the week with the US
PCE report. Keep also an eye on Fed speakers this week.
This article was written by Giuseppe Dellamotta at investinglive.com.