Fundamental Overview
Yesterday, the USD got a boost from a higher than expected US CPI report but gave back the gains pretty quickly. There are two reasons for such a reaction.
The first is that at the same time of the US CPI release we got the US Jobless Claims figures which jumped to the top of their yearly ranges. The culprit was attributed mainly to Hurricane Helene and the strikes.
The second reason is that the market was already positioned for a higher than expected reading as we’ve been seeing consistent upside in Treasury yields and the US Dollar in the days leading up to the release. Therefore, we got kind of a “sell the fact” reaction.
On net, it was a slightly hawkish report but it looks like the market needs some more reasons to keep bidding the US Dollar now that the market’s pricing is back in line with the Fed’s projections.
On the EUR side, the market has fully priced in a back-to-back 25 bps cut in October from the ECB following the weak data and dovish comments from ECB officials.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD bounced around the 1.09 handle following the US CPI release and it’s now looking like we could get a pullback into the 1.10 handle where we can find the confluence of the broken trendline and a key swing level.
That’s where we can expect the sellers to step in with a defined risk above the 1.10 handle to position for a drop into the 1.08 handle next, while the buyers will look for a break to the upside to increase the bullish bets into the 1.12 handle.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a downward trendline that was defining the bearish momentum. The price broke above the trendline this morning in a potential signal of more upside to follow.
The buyers will likely pile in around these levels to position for a pullback into the 1.10 handle. The sellers, on the other hand, will want to see the price falling back below the trendline to position for new lows.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance around the 1.0955 level which is the high set on the US CPI reaction. A break above this level will likely give the buyers more confidence to target the 1.10 handle.
The sellers, on the other hand, will likely pile in around these levels with a defined risk above the resistance to position for a drop into new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we conclude the week with the US PPI and the University of Michigan Consumer Sentiment survey.
