Fundamental
Overview
The USD has weakened pretty
much across the board last week despite a strong US ADP and ISM Services PMI. As mentioned previously, when
markets react like that it’s 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 63% probability of a December cut, which is about right. The
NFP and CPI reports will have the final say, and hopefully we will get them
before the next FOMC decision.
On the EUR side, nothing
has changed fundamentally. The ECB decision 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 small or shot-term
deviations 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 pulled all the way back to the key 1.1573 level where we have also
the major downward trendline for confluence. This is where we can expect the
sellers to step in with a defined risk above the trendline to position for a
drop into the 1.1393 level. The buyers, on the other hand, will want to see the
price breaking higher to increase the bullish bets into the 1.1700 handle next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the strong resistance zone around the 1.16 handle. Again, this
is where we can expect the sellers to step in to position for a drop into new
lows, while the buyers will look for a break higher to increase the bullish
bets into new highs.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here, but a break
below the 1.1542 low should change the short-term trend back to bearish and
likely increase the momentum. The red lines define average daily range for today.
Upcoming
Catalysts
This week is pretty empty on the data front. We just have the weekly US ADP data
tomorrow.
This article was written by Giuseppe Dellamotta at investinglive.com.