US:
- The Fed hiked by 25 bps as expected and kept everything unchanged at the last meeting.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- The US CPI last week came in line with expectations, so the market’s pricing remained roughly the same.
- The labour market displayed signs of softening although it remains fairly solid.
- The other important economic data like the ISM Services PMI, Jobless Claims and Retail Sales all beat expectations recently.
- The Fed members are leaning towards a pause in September and the next decision will still be dictated by the economic data.
- The market doesn’t expect the Fed to hike at the September meeting, but there’s now basically a 50/50 chance of a hike in November.
EU:
- The ECB hiked by 25 bps at the last meeting and added a line in the statement that hinted to the end of the tightening cycle.
- President Lagarde didn’t push back against the idea of them having reached already the terminal rate and highlighted the slowdown in Eurozone economy.
- Inflation measures did soften a bit lately but remain uncomfortably high.
- The labour market remains very tight with the unemployment rate hovering at record low levels.
- Overall, the economic data lately has been showing signs of fast deterioration in the economy pointing to a possible recession in the near future.
- The market doesn’t expect the ECB to hike anymore.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD sold off following the ECB policy decision as the central bank basically indicated that they are done already. The pair bounced on a previous swing low level at 1.0635 and it pulled back into the blue 8 moving average as the price was a bit oversold. EURUSD is in a clear downtrend as the price keeps printing lower lows and lower highs and the moving averages are crossed to the downside. The rallies are likely to be just good opportunities for the sellers to sell at even better prices. One such good level could be the confluence of the downward trendline and the red 21 moving average around the 1.0750 level.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a divergence with the MACD right when the price was testing the 1.0635 swing low level. This is generally a sign of weakening momentum often followed by pullbacks or reversals. The first sell zone for the sellers is the resistance around the 1.0690 level where we can find another minor downward trendline, the previous support turned resistance, the 50% Fibonacci retracement level and the red 21 moving average. If the price breaks above the trendline, we can expect a rally into the 1.0750 price zone where the sellers will pile in around the 38.2% Fibonacci retracement level of the entire fall since the 1.09 handle, the major downward trendline and the daily red 21 moving average.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that this pullback into the resistance might turn into a bearish flag pattern. In fact, if the price breaks below the counter-trendline, we should see more sellers piling in and increase the bearish momentum, ultimately leading to a break below the 1.0635 swing low level. The target for the sellers remains the 1.05 handle. The buyers, on the other hand, are likely to pile in at every upside breakout but they will need the price to break through the major trendline and the 1.08 handle to change the overall trend.
Upcoming Events
This week has just a couple of important economic releases with the FOMC rate decision tomorrow being the highlight. The Fed is expected to keep rates unchanged, and the market will focus more on the Dot Plot and Fed Chair Powell’s press conference, although he’s likely to repeat that they remain data dependent. Moving on to Thursday, we will see another US Jobless Claims report, while on Friday we conclude the week with the Eurozone and US PMIs data.
