Fundamental Overview
The USD got a boost from the strong US Consumer Confidence data which triggered an aggressive rise in long term Treasury yields. The report however just showed that the labour market remains resilient which is good news for growth and not necessarily bad news for inflation. The greenback benefited also from the risk-off sentiment which seems to be caused more by the month-end flows rather than a fundamental driver.
The EUR, on the other hand, has been gaining ground against the USD mainly because of the Dollar weakness and the risk-on sentiment. Moreover, the recent data from the Eurozone has been generally good with a pickup in the PMIs and high wage growth which led to the market scaling back a bit the rate cuts expectations. If we go back into risk-on sentiment, the greenback could start losing ground against the Euro again.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD couldn’t break above the key 1.09 handle and sold off into the 1.08 level following the US data and the risk-off sentiment. The price is now trading a bit below the 1.08 handle which technically opened the door for a drop into the 1.0727 level next.
The sellers will likely look for an entry around this level to position for a continuation of the drop with a good risk to reward setup. The buyers, on the other hand, will want to see some key breaks on the lower timeframes to indicate a change in the momentum.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price pulled back into the recent support-turned-resistance around the 1.0812 level. This is where we can expect the first rejection with the sellers stepping in with a defined risk above the level to position for the drop into the 1.0727 support.
The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for a rally back into the 1.09 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a good resistance zone at the 1.0812 level where we can find the confluence of the downward trendline and the 38.2% Fibonacci retracement level.
This is where the sellers will likely step in with a defined risk above the trendline to target the 1.0727 support next. The buyers, on the other hand, will want to see the price breaking above the trendline to invalidate the bearish setup and start targeting the 1.09 resistance.
Upcoming Catalysts
Today we will see the Eurozone Unemployment Rate and the latest US Jobless Claims figures. Tomorrow, we conclude the week with the Eurozone Flash CPI and the US PCE reports.
