Fundamental Overview
The US Dollar has come back under pressure recently as we got a couple of soft US data. The US ISM Manufacturing PMI disappointed the market as it came lower than expected and the new orders index dropped further into contraction. The US Job Openings yesterday showed some more cooling as the data missed expectations by a big margin. The Treasury yields fell as a consequence and weighed on the greenback.
In fact, the recent appreciation of the EUR has been mostly driven by the US Dollar side of the equation. From a monetary policy perspective, there’s now a 50/50 chance of either a 25 or 50 bps cut at the upcoming FOMC meeting, so the NFP report tomorrow will decide by how much the Fed is going to cut. For the ECB, the market sees a 99% probability of a 25 bps cut at the upcoming meeting with a total of 60 bps of easing by year-end.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD eventually fell below the 1.1136 level and extended the drop into the 1.1025 level as more sellers piled in. The target for the sellers should be the major trendline around the 1.09 handle. The buyers, on the other hand, will likely step in around the trendline to position for a rally into the 1.13 handle with a better risk to reward setup.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that after breaking below the minor upward trendline the bearish momentum increased as more sellers piled in and the buyers squared their positions. The price is now testing a strong resistance zone around the 1.11 handle where we can find the confluence of the previous swing low level and the 38.2% Fibonacci retracement level.
We can expect the sellers to step in with a defined risk above the resistance to position for a drop into the major trendline with a better risk to reward setup. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into new highs.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a counter-trendline defining the current bullish momentum. In case we get a rejection from the resistance, the buyers will likely lean on it to position for a break above the resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US ADP, the US Jobless Claims and the US ISM Services PMI. Tomorrow, we conclude the week with the US NFP report.