Last week, the Fed hiked by 25 bps as
widely expected and left everything unchanged. Fed Chair Powell in the press
conference just reaffirmed their data dependency and kept all the options on
the table. The economic data since the FOMC meeting has been supporting the
soft-landing narrative as the labour market data remained strong and the
inflation data missed expectations.
The ECB, on the other hand, hiked by 25 bps and
changed a line in the statement that leant more on the dovish side. President
Lagarde didn’t hint to what we can expect next and, in line with the Fed, just
reaffirmed their data dependency and kept all the options on the table. The
data for the Eurozone has been consistently missing expectations, but the
recent inflation and employment reports
remained strong.
EURUSD Technical Analysis –
Daily Timeframe
EURUSD Daily
On the daily chart, we can see that the failed
breakout of the top trendline led to a
big selloff back towards the 1.1033 level. This was a key resistance that turned support once the
price broke above it. In fact, the buyers were waiting there to position for
another rally with the red 21 moving average for confluence.
Unfortunately, after a brief rally, the price
reversed again and broke below the support and the moving average, eventually
bouncing on the upward trendline. This will be the last line of defence for the
buyers, but the bias is now more bearish as the price has been printing lower
lows and lower highs, and the moving averages have crossed to the downside.
EURUSD Technical Analysis –
4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can see more closely the
brief rally from the support and then the selloff as the US Jobless Claims came
in much better than expected. The price is now consolidating near the trendline
and the 1.1033 resistance. From a risk management perspective, the sellers
would have a better risk to reward setup near the downward trendline where we
have also the confluence of the resistance and the 50% or 61.8% Fibonacci retracement levels.
The buyers, on the other hand, can either start positioning for longs here at
the trendline or wait for the price to break above the downward trendline to
pile in more aggressively and target a new high.
EURUSD Technical Analysis –
1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can see that on
this timeframe the price has made a new higher high and the moving averages
have crossed to the upside. This signals that the bullish momentum is
prevailing in the short-term and we might see the price rallying all the way up
to the downward trendline. If the rally fails though and the price breaks below
the recent low at 1.0945, the sellers are likely to pile in aggressively to
extend the fall into the 1.0832 swing level.
Upcoming Events
Today we have the US
ADP, which is generally a less reliable labour market indicator, but it can
move the market. Tomorrow the market will be focused on the US Jobless Claims
and the ISM Services PMI. On Friday, all eyes will be on the main event of the
week: the US NFP report. Strong data for the US should support the US Dollar as
the market would lean on the more hawkish side. On the other hand, weak
readings should weigh on the greenback as it would give the market more
confidence on the end of the rate hike cycle.
See also the video below: