The miss in the US CPI report last week triggered a heave US Dollar selling across the board. The market started to price out the more hawkish expectations and now sees the July hike as the last one for this cycle. Moreover, the resilient labour market and the rising consumer sentiment point to a soft-landing scenario where inflation comes down to target without affecting too much economic growth. In fact, even the US Retail Sales recently beat expectations on the Control Group, which is a better gauge of consumer spending.
The ECB has already committed to a rate hike in July, so even if the data disappoints going forward, it’s more likely to affect the September decision rather than the July one. In fact, the ECB members keep repeating that the September hike is more uncertain, and it will depend on the incoming data.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD had a massive rally since bottoming out on the red 21 moving average near the 1.08 handle. After breaking out of the upper bound of the rising wedge pattern though, the bullish momentum started to wane and the price is now pulling back into the blue 8 moving average and the top trendline of the pattern.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price has broken below the blue upward trendline that defined the rally since the breakout of the descending triangle. This led to a pullback into the top trendline of the wedge pattern and we can see that we have also the 23.6% Fibonacci retracement level for confluence. We should see the buyers stepping in here with a defined risk below the trendline to target new higher highs. On the other hand, if the price breaks below the trendline, it might mean that the upside breakout was just a fakeout and could lead to a massive downside into the 1.08 handle with the sellers piling in aggressively.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current consolidation just above the top trendline and we can also notice that the price has already bounced on the 23.6% Fibonacci retracement level. If the uptrend has already restarted, we should see the price breaking above the most recent higher low at 1.1240 and see the buyers piling even more to target the 1.15 handle.
Upcoming Events
Today the main event will be the US Jobless Claims report. The market is still trading on the soft-landing hopes, so a small miss to the expectations is unlikely to cause big movements and it may even be an opportunity to buy the dip. We should focus more on big deviations from the expected numbers. In fact, a beat should give the USD some support and a miss may weaken it even more as the market would bring forward rate cuts expectations.
