Fundamental
Overview
The USD came under renewed
pressure last Thursday following an in-line US CPI report and surprisingly weak initial jobless claims. The jobless claims data stole the
show as initial claims jumped to a new cycle high and the highest level since
2021.
On further analysis, the
claims data might have been just a blip as it was negatively skewed by an unusually
large spike in Texas. Nevertheless, the data kept the weakening labour market
narrative intact and therefore solidified the expectations for three rate cuts
by year-end.
Overall, if one zooms out,
the US dollar has been mostly rangebound even though the dovish bets on the Fed
kept weighing on the currency. Part of that could be the fact that the bearish
positioning on the dollar could be overstretched and we might be at the peak of
the dovish pricing.
In fact, if the rate cuts
trigger stronger economic activity in the next months, the rate cuts in 2026
could be priced out and support the dollar. Nevertheless, the trend is still
skewed to the downside, and we might need strong data to reverse 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 got rejected near the 1.1789 level and then got back into the
same old range. If we get another spike into the 1.1789 level, we can expect
the sellers to step in with a defined risk above the level to position for a
drop back into the 1.16 support.
The buyers, on the other hand, will look for a break higher to target an extension
into the 1.1831 level next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that the price is trading right at the top of the range around the 1.1745
level. This is where we can expect the sellers to step in with a defined risk
above the range to position for a drop into the 1.16 support. The buyers, on the
other hand, will look for a break higher to extend the rally into the 1.1789
level next.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the sellers
will continue to pile in around the top of the range to position for the drop
into the 1.16 support, while the buyers will look for a break higher to target
the 1.1789 level next. The red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we get the US Retail Sales data. On Wednesday, we
have the FOMC policy announcement. On Thursday, we get the lates US Jobless
Claims figures. Keep also an eye on WSJ’s Timiraos as he could signal a 50 bps
cut in his Fed preview.
This article was written by Giuseppe Dellamotta at investinglive.com.