The Fed is waiting for the totality of the data to be released before deciding what to do at their September meeting. As of now, the data supports the soft-landing narrative as the disinflation in the core measures continues but the strength in the labour market and consumer spending might keep inflation higher for longer. This is something that might translate into more rate hikes or a “higher for longer-er” stance. Recently the long-term Treasury yields have been rising non-stop and this has benefited the US Dollar but the reason for such a rally is still unclear.
The ECB, on the other hand, hiked by 25 bps and changed a line in the statement that leant more on the dovish side. President Lagarde didn’t hint to what we can expect next and, in line with the Fed, just reaffirmed their data dependency and kept all the options on the table. The data for the Eurozone has been consistently missing expectations, but the recent inflation and employment reports remained strong justifying another rate hike in September all else being equal.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD broke through the trendline, retested it and continued lower towards the next support at 1.0832. The sellers are in control and the trend is clearly bearish as the price keeps printing lower lows and lower highs with the moving averages crossed to the downside. The next big level will be the trendline around the 1.08 handle as a break below it would open the door for a selloff into the 1.0515 level.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we’ve been diverging with the MACD for a while. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we are likely to see the pullbacks and a good resistance will be the one around the 1.0940 level as we have the trendline and the 38.2% Fibonacci retracement level. This is where the sellers are likely to pile in with a defined risk above the trendline and target the 1.08 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the recent price action is forming a falling wedge. This is generally a reversal pattern as we can notice that we have also a divergence with the MACD. The target is often the top of the wedge which would coincide with the previously mentioned resistance around the 1.0940 level. The price will need to break above the top trendline though to confirm the pullback into the resistance. Note also that failed patterns can be even more meaningful as they tell you that the momentum is very strong and the market clearly wants to go into that direction.
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