Fundamental Overview
The surprisingly weak US NFP report last Friday triggered risk-off flows. Interestingly, while many major currencies weakened against the USD, the Euro strengthened a lot which reminded the famous words from former ECB’s President Draghi when he said “The Euro is like a Bumblebee. This is a mystery of nature because it shouldn’t fly but it does.”
It might be due to yields spreads shooting in favour of the Euro as the market priced in a very aggressive rate cuts path for the Fed or just because it’s the second largest world’s reserve currency. Anyway, at the moment the market is expecting the Fed to cut rates by 50 bps in September and a total of 110 bps of easing by year-end.
For the Euro, the market is seeing a 25 bps cut in September and a total of 68 bps of easing by year-end. The ECB speakers hinted that the market’s path for interest rates is reasonable but the recent events in the markets have been exaggerated for just a single data point.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD broke through the 1.09 resistance following the weak US NFP report and extended the gains into the 1.10 handle. That’s where the sellers stepped in with a defined risk above the level to position for new lows. The buyers will want to see the price breaking above the 1.10 handle to increase the bullish bets into the 1.1136 level next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see the strong bullish impulse that we got on the US NFP release that led to key breakouts of the downward trendline and the 1.09 resistance. We have now a nice support zone around the 1.09 handle where we can also find the 50% Fibonacci retracement level for confluence.
If the price gets there, we can expect the buyers to step in with a defined risk below the support 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 1.0812 level next.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a decent resistance zone around the 1.0940 level where the price got rejected from several times in the past days. This might act as kind of a barometer for the sentiment with the price staying above being more bullish and staying below being more bearish. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures which will likely be a strong market moving release given the market’s focus on the labour market. The market will also pay close attention to Fed members’ comments with Fed’s Barkin scheduled to speak later in the day.
