Yesterday, the Fed hiked by 25 bps bringing the FFR to 5.25-5.50% as widely expected. The statement was left basically unchanged. The market was more interested on the Fed Chair Powell’s press conference to see if he could offer any forward guidance. Unfortunately, Powell just repeated their data dependency and left all options on the table for the September meeting.
The ECB is expected to hike by 25 bps bringing the deposit rate to 3.75% today. The central bank should stress their data dependency for the September meeting, and they are unlikely to pre-commit to anything at this meeting. As a reminder, the Eurozone PMIs keep on falling pretty fast as the deterioration in the economy becomes clearer going into the second half of the year and points to a possible recession.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the price has retraced all the way back to the previous 1.1033 resistance turned support after the breakout of the top trendline. The buyers re-entered the market leaning on the 1.1033 support where we had also the confluence with the red 21 moving average and the 50% Fibonacci retracement level. If this is the start of another rally, the target should be the 1.14 handle.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that after the bounce of the support zone, the price has broken above the downward trendline and the moving averages have crossed to the upside. This is a sign that the trend is changing again, and the buyers should have the upper hand. The sellers need the price to break below the 1.1033 support to get back some control and start to target the major trendline first and eventually a bigger selloff.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price was diverging with the MACD falling into the key 1.1033 support zone which was a signal that the bearish momentum was weakening and a pullback or reversal was in the cards. In fact, the price indeed bounced on the support and it’s now rallying into the next resistance at 1.1147. This is where we should see the sellers piling in with a defined risk above the resistance and target the break below the 1.1033 support. The buyers, on the other hand, will need the price to break above the resistance to get even more conviction for a major rally and pile in more aggressively.
Upcoming Events
Today the main event is the ECB rate decision where the central bank is expected to hike by 25 bps and just stress their data dependency for the next move. Later in the day, the market will focus on the US Jobless Claims report where a big beat should give the USD some support while a big miss may weaken it even more. Tomorrow, all eyes will be on the latest US PCE and ECI reports with the market more likely to be focused on the wages data given the tight labour market.
