Fundamental Overview
The USD has been stronger since last Friday following the US NFP report where the data surprised with solid jobs and wage growth. There were also negatives like the uptick in the unemployment rate, but all in all, we can say that it was a good report.
The data triggered a hawkish repricing in interest rates expectations with the market now expecting once again just one cut by the end of the year. It’s not a big deal in the bigger picture, but for now the sentiment is bullish for the greenback and we will likely need a catalyst to change it again.
The EUR, on the other hand, has been gaining ground in the past months against the USD mainly because of the Dollar weakness amid the general risk-on sentiment regime due to the pickup in global growth.
This sentiment has been changed by the NFP data and the European elections over the weekend where we got some governments like France calling snap elections which added even more pressure on the single currency due to political uncertainty.
All eyes today will be on the US CPI and FOMC decision as they can turn the sentiment around or exacerbate it further.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD sold off following the strong US NFP report and the European elections and now sits around the key 1.0727 support.
This is where we can expect the buyers to step in with a defined risk below the level to position for a rally into new highs with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 1.06 handle next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have also the 61.8% Fibonacci retracement level of the entire rally from the 1.06 region standing around the 1.0727 level. This has been an important level for market participants in the past months.
The price action today will depend on the US CPI report. In fact, if we get hot figures, we can expect the pair to sell off further and likely reach the 1.06 handle. On the other hand, soft data should give the pair a boost and take us back into the 1.08 resistance.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that from a risk management perspective, the sellers will be better off waiting for a pullback into the 1.08 resistance where they will also find the 50.0% Fibonacci retracement level for confluence.
The red lines show the average daily range for today but the price can extend beyond them when there are strong catalysts like today’s US CPI, so be careful.
Upcoming Catalysts
Today we get the US CPI data and the FOMC rate decision. Tomorrow, we have the US PPI and the latest US Jobless Claims figures. On Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.