EURUSD Technical Analysis – “Sell on rallies” mode

US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• The US CPI last
  week came in line with expectations, so the market’s pricing remained roughly
  the same.
• The labour market
  displayed signs of softening although it remains fairly solid.
• The other important economic data like the ISM
  Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
• The Fed members are leaning towards a pause in
  September and the next decision will still be dictated by the economic data.
• The market doesn’t expect the Fed to hike at the
  September meeting, but there’s now basically a 50/50 chance of a hike in
  November.

EU:

• The ECB hiked by 25 bps at the
  last meeting and added a line in the statement that hinted to the end of the
  tightening cycle.
• President Lagarde didn’t push back against the idea
  of them having reached already the terminal rate and highlighted the slowdown
  in Eurozone economy.
• Inflation measures
  did soften a bit lately but remain uncomfortably high.
• The labour market remains
  very tight with the unemployment rate hovering at record low levels.
• Overall, the economic data lately has been showing
  signs of fast deterioration in the
  economy pointing to a possible recession in the near future.
• The market doesn’t expect the ECB to hike anymore.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD sold off
following the ECB policy decision as the central bank basically indicated that
they are done already. The pair bounced on a previous swing low level at 1.0635
and it pulled back into the blue 8 moving average as the
price was a bit oversold. EURUSD is in a clear downtrend as the price keeps
printing lower lows and lower highs and the moving averages are crossed to the
downside. The rallies are likely to be just good opportunities for the sellers
to sell at even better prices. One such good level could be the confluence of the
downward trendline and the
red 21 moving average around the 1.0750 level.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we had a divergence with the
MACD right
when the price was testing the 1.0635 swing low level. This is generally a sign
of weakening momentum often followed by pullbacks or reversals. The first sell
zone for the sellers is the resistance around
the 1.0690 level where we can find another minor downward trendline, the
previous support turned resistance, the 50% Fibonacci retracement level
and the red 21 moving average. If the price breaks above the trendline, we can
expect a rally into the 1.0750 price zone where the sellers will pile in around
the 38.2% Fibonacci retracement level of the entire fall since the 1.09 handle,
the major downward trendline and the daily red 21 moving average.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that this
pullback into the resistance might turn into a bearish flag
pattern. In fact, if the price breaks below the counter-trendline, we should
see more sellers piling in and increase the bearish momentum, ultimately
leading to a break below the 1.0635 swing low level. The target for the sellers
remains the 1.05 handle. The buyers, on the other hand, are likely to pile in
at every upside breakout but they will need the price to break through the
major trendline and the 1.08 handle to change the overall trend.

Upcoming Events

This week has just a couple of important economic
releases with the FOMC rate decision tomorrow being the highlight. The Fed is
expected to keep rates unchanged, and the market will focus more on the Dot
Plot and Fed Chair Powell’s press conference, although he’s likely to repeat
that they remain data dependent. Moving on to Thursday, we will see another US
Jobless Claims report, while on Friday we conclude the week with the Eurozone
and US PMIs data.