Fundamental Overview
The USD weakened across the board last week following another soft US CPI report and benign Jobless Claims figures. The market not only fully priced in a rate cut in September but also started to price in some chances of a back-to-back rate cut in November.
Overall, we had a goldilocks data release with an economy that is slowing but still growing. This should support the soft-landing narrative and be positive for the risk sentiment.
The EUR, on the other hand, keeps on gaining against the US Dollar mainly because of the risk-on sentiment as the US data continues to support at least two rate cuts from the Fed without sending recessionary signals.
On the monetary policy front, the ECB members continue to repeat that they will wait for the data throughout summer before deciding on a rate cut in September. So, the ECB rate decision this week should be a non-event.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD is struggling to break above the 1.09 level and extend the rally into the 1.10 handle. This is where the sellers are stepping in with a defined risk above the level to position for a drop back into the 1.0812 support. The buyers will want to see the price breaking higher to increase the bullish bets into the 1.10 level next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that from a risk management perspective, the buyers will have a better risk to reward setup around the trendline at the 1.0840 level. We can also see that we have another steeper trendline around the 1.0885 level. Some aggressive buyers might lean on it or split their orders in half to avoid missing a possible rally from these levels. The sellers, on the other hand, will likely pile in at every break lower.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see the recent price action and we can notice that the momentum has indeed waned at the 1.09 handle. Today we get the US Retail Sales data and that could provide either a spike to the upside or a break below the trendline and a possible pullback into the next trendline around the 1.0840 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the US Retail Sales report. Tomorrow, we have Fed’s Waller speaking. On Thursday, we conclude with the ECB rate decision and the latest US Jobless Claims figures.