The Fed has eventually paused at the last meeting keeping interest rates at 5.00-5.25%. They did so because they want to see more economic data before deciding on another hike as they are trying to find the optimal level of monetary restraint to bring inflation down to target without too much pain for the economy.
The ECB, on the other hand, raised interest rates by 25 bps as expected and hinted to another hike in July. ECB speakers have also confirmed the upcoming rate hike and signalled another one in September if conditions suggest such a move. This has created a bit of policy divergence between the Fed and the ECB, ultimately favouring the Euro.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the EURUSD has erased almost all the losses seen in May and it’s now back to the 1.0941 resistance. Last week the price overextended as depicted by the distance from the blue 8 moving average. Generally, we can see some consolidation or a pullback into the moving average before the next move. The trend remains bullish as the moving averages are crossed to the upside and the price keeps making higher highs and higher lows.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the EURUSD is pulling back at the moment and it’s finding some support on the red 21 moving average. From a risk management perspective, the buyers would be better off waiting for the price to fall into the trendline where we can also find a previous swing high level, the 50% Fibonacci retracement level and the daily 8 moving average for confluence. This would be a good support zone where they can lean on with a defined risk just below it and target the 1.1033 high.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the trend on this timeframe is bearish as the moving averages are crossed to the downside and the price is making lower lows and lower highs. Unless the price rallies and breaks above the 1.0941 resistance, we can expect the EURUSD to fall into the trendline. The sellers, on the other hand, can either lean on the 1.0941 resistance with a stop above the recent high or wait for the price to break below the trendline to target the 1.0779 support.
This week is pretty bare on the data front but we will have some important events to keep an eye on starting with Fed Chair Powell’s testimony on Wednesday, the US Jobless Claims on Thursday and concluding with the US PMIs on Friday.