Fundamental Overview
The strong bullish momentum in the US Dollar waned a bit in this final part of the week as we got a pullback in Treasury yields. In fact, the main culprit for the US Dollar strength lately has been the rally in long term Treasury yields.
The yield curve has been bear-flattening which is what you would expect with higher growth and potentially higher inflation expectations. There’s a good argument that this rally was a reflection of higher Trump’s winning odds.
On the EUR side, the ECB cut interest rates by 25 bps as expected at the last policy decision but didn’t offer anything new in terms of forward guidance as the central bank remains data dependent and it’s not pre-committing to a particular rate path.
The market is pricing an 90% chance of another 25 bps cut in December with 10% probabilities of a larger 50 bps cut. A higher than expected Eurozone CPI today might erase the expectations for a bigger cut.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD bounced off of the key swing level at 1.0777 as the buyers stepped in with a defined risk below the level to position for a pullback into the 1.10 handle. The sellers will want to see the price breaking below the swing level to increase the bearish bets into the 1.06 handle next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price broke above the downward trendline that was defining the bearish momentum on this timeframe. That’s generally a signal for a pullback. The buyers will need to break above the most recent swing high at 1.0870 to increase the bullish bets into the 1.10 handle. The sellers, on the other hand, will likely step in around these levels to position for the break below the 1.0777 level.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we now have a minor upward trendline defining the current bullish momentum on this timeframe. The buyers will likely keep on leaning on it to position for new highs, while the sellers will look for a break lower to target the 1.0777 level. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the Eurozone CPI, the US PCE, the US Jobless Claims and the US Employment Cost Index data. Tomorrow, we conclude the week with the US NFP and the US ISM Manufacturing PMI.
