Fundamental Overview
The US Dollar got a bit of a boost this week as Fed Chair Powell reiterated that 50 bps of easing by year end remains the base case. The market’s probability for the Fed to cut by 50 bps in November fell from 51% to 40% as a result.
On the data side, the ISM Manufacturing PMI released yesterday missed expectations slightly. On the bright side, the new orders index improved a little which might be an early signal of better times ahead. By contrast, the employment component fell further into contraction but remained above the cycle low.
On the EUR side, the market has fully priced in a back-to-back 25 bps cut in October from the ECB following the weak Eurozone PMIs and dovish comments from ECB officials. The Eurozone Flash CPI released this week came out in line with expectations, but the services inflation has been stuck above 4% for a year now.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD got rejected once again from the 1.12 resistance, but this time around the price fell below the 1.11 handle. From a risk management perspective, the buyers will have a better risk to reward setup around the trendline. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bearish momentum increased as the price broke below the minor upward trendline that was defining the bullish momentum. The sellers piled in and extended the drop into the 1.1050 level. The next big support zone is around the 1.10 handle. That’s where we can expect the buyers to step in with a defined risk below the support to position for a rally back into the 1.12 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a downward trendline defining the current bearish momentum. The sellers will likely keep on leaning on it to position for further downside, while the buyers will want to see the price breaking higher to target a pullback into the 1.1120 resistance. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the Eurozone Unemployment Rate and the US ADP report. Tomorrow, we get the latest US Jobless Claims figures and the US ISM Services PMI. Finally, on Friday, we conclude the week with the US NFP report.