USD

  • The Fed left interest rates unchanged as expected at the last meeting while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
  • Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
  • The US CPI beat expectations for the second consecutive month with the disinflationary trend reversing.
  • The US PPI beat expectations across the board by a big margin.
  • The US Initial Claims beat expectations while Continuing Claims missed. Overall, the data remains steady.
  • The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
  • The US Retail Sales missed expectations across the board by a big margin.
  • The market now expects the first rate cut in June.

EUR

  • The ECB left interest rates unchanged as expected at the last meeting maintaining the usual data dependent language.
  • The recent Eurozone CPI came in line with expectations with the disinflationary process continuing steady.
  • The labour market remains historically tight with the unemployment rate hovering at record lows.
  • The Eurozone PMIs beat expectations on the Services side with the measure jumping back into expansion while the Manufacturing one missed dragged lower by Germany’s performance.
  • The ECB members recently have been pushing back against the aggressive rate cuts expectations placing more weight on wage growth and data dependency.
  • The market expects the ECB to cut rates in June.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis
EURUSD Daily

On the daily chart, we can see that EURUSD broke through the key trendline and the red 21 moving average and extended the rally into the 1.09 handle. This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the lows. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.10 handle.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see more clearly the breakout of the key resistance zone around the 1.08 handle. The price pulled back at some point to retest the resistance turned support and extended the rally into the 1.09 handle. From a risk management perspective, the buyers will now have a much better risk to reward setup around the upward trendline where they will also find the red 21 moving average for confluence. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and increase the bearish bets into the lows.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 1 hour

On the 1 hour chart, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be a signal for a pullback into the trendline.

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