Fundamental Overview
The US Dollar continues to consolidate around the highs as the market reached the peak in the repricing of interest rates expectations and it will need stronger reasons to price out the remaining rate cuts for 2025.
This was signalled by the lack of US Dollar strength after lots of strong US data with the market’s pricing remaining largely unchanged around three rate cuts by the end of 2025. We might see the greenback remaining on the backfoot at least until the US CPI due next week.
On Monday, Fed’s Waller and Fed’s Williams sounded like a rate cut in December is basically a done deal with the plan to slow the pace of rate cuts considerably in 2025. That’s in line with the market’s pricing.
We will likely need another hot CPI report to force them to skip the December cut. In case the data comes out as expected or even misses forecasts, then we can expect more USD weakness.
On the EUR side, the probabilities for a 50 bps cut in December dropped to 14% and a 25 bps cut is now a done deal. Of course, most of the gains in the EUR/USD pair came from the USD weakness.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD continues to consolidate around the key 1.05 handle. From a risk management perspective, the sellers will have a better risk to reward setup around the trendline to position for a drop into new lows. The buyers, on the other hand, will want to see a break higher to increase the bullish bets into the 1.09 handle next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the rangebound price action near the 1.05 handle as the market awaits the US NFP and the US CPI before picking a direction. If we get a pullback into the 1.0610 level, we can expect the sellers to step in with a defined risk above the level to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to extend the rally into the trendline and target a break above it.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a zone of interest around the 1.0540 where the price reacted from several times in the past days. The sellers will likely keep on stepping in around this zone to position for new lows, while the buyers will look for a break higher to target new highs. The red lines define the average daily range for today.
Upcoming Catalysts
Today, we get the latest US Jobless Claims figures, while tomorrow we conclude the week with the US NFP report.
