US:
- The Fed hiked by 25 bps as expected and kept everything unchanged.
- Fed Chair Powell reaffirmed their data dependency and kept all the options on the table.
- Inflation expectations and CPI readings continue to show disinflation with the last two Core CPI M/M figures coming in at 0.16%.
- The US PMIs missed expectations across the board last week, while the US Jobless Claims remained solid.
- Fed Chair Powell’s speech at the Jackson Hole Symposium was mostly in line with what he said previously but he stressed on the need to be careful going forward and that continued strength in the labour market may require further rate hikes.
- The first half of the week saw US Job Openings and Consumer Confidence reports missing expectations by a big margin, followed by a miss in the US ADP data yesterday.
- The market doesn’t expect another hike from the Fed anymore, but a lot will depend on the data going forward.
EU:
- The ECB hiked by 25 bps and changed a line in the statement that leant more on the dovish side.
- President Lagarde didn’t hint to what we can expect next and, in line with the Fed, just reaffirmed their data dependency and kept all the options on the table.
- The Eurozone PMIs missed expectations across the board with the Services sector plunging in contraction.
- President Lagarde at the Jackson Hole Symposium didn’t signal much but she wasn’t as dovish as the market expected her to be.
- The Eurozone CPI beat expectations on the headline reading due to higher energy prices, but the Core CPI came out in line with forecasts.
- The market doesn’t expect the ECB to hike at the upcoming meeting.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD yesterday broke out of the downward trendline but found strong sellers around the red 21 moving average. The price is now falling back below the trendline in what could end up being a fakeout. This is generally a bearish signal so the buyers will need to break out again to invalidate the bearish setup.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we’ve been diverging with the MACD for a long time and this is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a breakout of the trendline which should point to a bigger pullback into the 1.1033 level, so what happens after today’s fakeout will be key. Right now, the price is testing the red 21 moving average and we should find buyers stepping in here, but if the price continues lower, then the sellers will be in control and start targeting a break below the major bottom trendline.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a support zone at the last higher low level where we can also find the 50% Fibonacci retracement level for confluence. If the price breaks through it, it will make a new lower low and switch the market structure from bullish to bearish. So, the buyers should step in here with a defined risk below the level to target a new higher high, while the sellers will want to see a break lower to pile in and extend the selloff.
Upcoming Events
This week is all about the US labour market data and the recent releases haven’t been encouraging on a forward-looking basis. Today, the main event will be the US Jobless Claims report accompanied by the US PCE data. Tomorrow, we conclude the week with the US NFP and ISM Manufacturing PMI reports.
