Fundamental Overview
The USD continues to consolidate around the highs except against the commodity currencies where it’s been having the upper hand. The US inflation data last week was once again a disappointment although the data that feeds into the Core PCE was overall benign as forecasters expect a 0.13% M/M increase.
Nonetheless, the Treasury yields continue to climb and are now back around the post-US election highs. There’s some understandable uneasiness in the bond market given the hot US data and the Fed continuing to cut into an accelerating economy.
On the EUR side, the ECB cut interest rates by 25 bps as expected. The central bank removed the line saying it will keep policy rates sufficiently restrictive for as long as necessary which the market took as a signal that they are not in restrictive zone anymore and can slow the pace of rate cuts as they approach the neutral rate.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD continues to consolidate between the 1.0610 resistance and the 1.0450 support. From a risk management perspective, the sellers will have a better risk to reward setup around the trendline to position for a drop into new lows. The buyers, on the other hand, will want to see a break above the trendline to increase the bullish bets into the 1.09 handle next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the rangebound price action that’s been going on for a month as the market reached the peak in the repricing of rate cuts for the Fed. We have an interesting zone around the 1.0550 level that’s been acting as kind of a barometer with the price above it being more bullish and below it being more bearish. Overall, we continue to trade in this 150-pips range and we will likely need a strong catalyst to get out of it.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here and the buyers will want to see the price breaking above the 1.0550 zone to target a break above the trendline, while the sellers will look for a break below the 1.0450 support to pile in for new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we get the US Retail Sales data. Tomorrow, we have the FOMC Policy Decision. On Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude the week with the US PCE data.
