US:
- The Fed left interest rates unchanged as expected.
- The macroeconomic projections were revised higher as the economy showed much stronger resilience than expected and the Dot Plot showed that the majority of members still expects another rate hike by the end of the year with less rate cuts in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully as they are trying to find the optimal level of rates. Powell also added that the soft landing is not the base case at the moment, although they are aiming for it.
- The latest US Core PCE came in line with expectations with disinflation continuing steady.
- The labour market displayed signs of softening although it remains fairly solid as seen also last week with a strong beat in Jobless Claims.
- The ISM Manufacturing PMI beat expectations yesterday in another sign that the US economy remains resilient.
- The market doesn’t expect the Fed to hike again at the moment.
EU:
- The ECB hiked by 25 bps at the last meeting and added a line in the statement that hinted to the end of the tightening cycle.
- President Lagarde didn’t push back against the idea of them having reached already the terminal rate and highlighted the slowdown in Eurozone economy.
- The Eurozone CPI missed across the board last week supporting the ECB’s stance.
- The labour market remains very tight with the unemployment rate hovering at record low levels.
- Overall, the economic data lately has been showing signs of fast deterioration in the economy.
- The majority of ECB members is leaning towards keeping rates higher for longer now.
- The market doesn’t expect the ECB to hike anymore.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the EURUSD pair bounced on the key 1.05 support but fell below it soon after as the US data continues to surprise to the upside while the Eurozone data keeps on weakening. The trend is undoubtedly bearish for the pair as the price continues to print lower lows and lower highs with the moving averages being crossed to the downside, but from a risk management perspective, the sellers would be better off shorting again from the downward trendline where there’s also the confluence with the red 21 moving average.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the latest leg lower is diverging with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we might see a pullback into the downward trendline where we can find the confluence with the previous support turned resistance and the 38.2% Fibonacci retracement level. That would be a great place where the sellers are likely to step in with a defined risk above the trendline to target the 1.02 handle. The buyers, on the other hand, will need the price to break above the trendline to turn the trend around and position for higher highs.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor resistance around the 1.05 handle where we can find the confluence with the 38.2% Fibonacci retracement level of the latest selloff and the previous support turned resistance. That’s where the sellers are likely to pile in with a defined risk above the resistance to target new lower lows. The buyers, on the other hand, will want to see the price breaking above the resistance to position for a rally into the resistance zone around the 1.0630 level.
Upcoming Events
This week we have many key economic releases that will culminate in the US NFP report on Friday. Today, we will have the US Job Openings data which led to a strong rally the last time as the big miss made Treasury yields to fall due to less labour market tightness and less hawkish Fed expectations. Tomorrow, it will be the time for the ADP report and the ISM Services PMI. On Thursday, we will see the Jobless Claims data, which continues to show a solid labour market. Finally on Friday, it will be the time for the NFP report which is the only one the Fed will see before its next rate decision.
