The recent beat in the NFP data followed by weak details like the higher unemployment rate and lower average weekly hours, has weakened the USD as the market started to reprice the hawkish expectations on a less hawkish side as a looser labour market can bring inflation down. The miss in the ISM Services PMI added to the less hawkish expectations, especially due to the lower prices paid sub-index that may give hopes that core inflation could fall soon.
The big miss in Jobless Claims was taken with a pinch of salt due to seasonal adjustments and the Continuing Claims showed even more improvement which is a sign that workers are able to find jobs pretty fast after being unemployed. Overall, the big hawkish flip seen in May due to hot economic data, started to reverse recently as Fed members expressed preference for a skip at this FOMC meeting and the economic data started to disappoint.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the EURUSD bottomed out near the 1.07 handle and started to pull back into the 1.08 handle. The moving averages are about to crossover, which might be an ominous sign for the sellers as the trend might change and the pullback turn into the first leg of a bigger rally. The target of this pullback looks to be the 1.0840 resistance where we should find more sellers.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the buyers remain in control and with the recent bounce on the red 21 moving average and a break above the 1.0780 high, we can expect EURUSD to tap into the 38.2% Fibonacci retracement level and possibly even the 1.0840 resistance zone. This is where more long-term sellers should enter the market with a stop likely above the 1.09 handle and the 1.0533 as the first target.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that in the short term the price is making higher highs and higher lows indicating a bullish structure. The buyers will need to break above the 1.0840 resistance zone to get even more conviction of a change in trend and start targeting the 1.1033 high. Eventually, it will all come down to the fundamental events this week.
This week there are many important events beginning with the US CPI report today, which is likely to seal the expectations for the tomorrow’s FOMC rate decision. The easiest scenarios should be a rally in the EURUSD pair if the CPI data misses across the board and a selloff in case the CPI beats on everything. The market is likely to focus more on the Core CPI, so that will be the most important measure to watch.
Later in the week we have another Jobless Claims report and the University of Michigan consumer sentiment survey, which has impacted the market a lot last time with the big jump in long term inflation expectations, so a miss would be welcome news for the EURUSD bulls.