EURUSD Technical Analysis

The Fed this
week came out slightly more hawkish than expected keeping interest rates unchanged
at 5.00-5.25% but adding 50 bps to the projected terminal rate in the Dot Plot.
The FOMC decided to pause at this meeting to gather more economic data before
deciding on another possible hike at the July meeting. Their caution be
justified by the weaker details in the latest NFP report,
the ISM Services PMI report
and the CPI report,
although the core readings remain sticky at elevated levels.

Fed Chair
Powell mentioned that the July meeting is “live”, but he didn’t want to
pre-commit. The market reacted with a quick bid in the US Dollar when the Dot
Plot was released but returned back to the original levels once Powell’s press
conference began. Overall, it just shows that the Fed is ready to do more to
bring inflation down, but it will all depend on the economic data. Yesterday,
the US Jobless Claims missed
expectations once again by a notable margin, which may be another sign that the
labour market is indeed weakening.

The ECB raised
interest rates by 25 bps as expected and hinted to another hike in July coming.
Moreover, the ECB sources said that a further hike in September will be
discussed in the summer. This has created a bit of policy divergence between
the Fed and the ECB, favouring the Euro.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that ultimately the
EURUSD bottomed out once the Fed members signalled a June skip at the end of
May and the US data started to disappoint. The pricing out of the more hawkish
expectations led the USD to erase the gains and eventually to tumble as the
other central banks either surprised with rate hikes or signalled more to come.
The moving averages have
crossed again to the upside, which is a bad omen for the USD buyers.

Yesterday the price overstretched a bit following
the hawkish ECB event and it’s now back to a previous support now turned resistance.
Generally, when the price extends so much from the blue 8 moving average, we
can see some consolidation or a pullback to bring it back into some equilibrium
before the next move.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the buyers
have leant on the red 21 moving average to position for more longs and the
price is now consolidating a bit at the 1.0942 resistance. The
price may keep on rallying today and extend all the way up to the 1.1033 high,
but from a risk management perspective, the risk to reward of going long here
is bad.

A good support level for the buyers should be the
1.0850 level where we can find confluence with the
red 21 moving average, the trendline and the
38.2% Fibonacci retracement level.
The stop in that case would be below the 61.8% Fibonacci level and the target
roughly at the 1.11 handle. An even better support would be the above mentioned
61.8% Fibonacci retracement level where the buyers would have a very tight stop
below.

The sellers, on the other hand, are likely to lean on
this 1.0941 resistance to target the trendline or the 1.0779 support. If the
price falls below the 1.0779 level, we should see more sellers piling in and
extend the selloff into the 1.0635 low.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the trading setup for the buyers and the sellers. The buyers should
lean on the 1.0850 support zone, while the sellers can either go short here
with a stop somewhere above the high targeting the trendline or wait for the
break below the 1.0779 support to pile in for a selloff into the 1.0635 low.

Today,
the market is likely to focus on the University of Michigan consumer sentiment
report. Last time, the market reacted heavily to it because long term inflation
expectations showed a big jump to the upside rising from 3.0% to 3.2%. Later
on, the number was revised to 3.1% though. So, we are likely to see the dollar
rising in case we see another jump in long term inflation expectations and
falling in case the data misses forecasts.