Fundamental Overview
Since last Friday, the USD has been mostly weak as Fed Chair Powell delivered a more dovish than expected speech at the Jackson Hole Symposium where he basically kept the door open for a 50 bps cut at the September meeting. In fact, the line saying that they will do everything they can to support a strong labour market was key.
That pushed Treasury yields lower and weighed on the greenback across the board. In fact, the recent appreciation of the EUR has been mostly driven by the US Dollar side of the equation. The ECB started its easing cycle before the Fed and the market expects the central bank to deliver at least two more rate cuts before year-end.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD eventually managed to break above the 1.1136 level and consolidated just above it. We can expect the buyers to pile in around these levels to position for a rally into a new cycle high at the 1.13 handle. The sellers, on the other hand, will want to see the price falling back below the 1.11 handle to position for a drop back into the 1.10 handle.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a good support zone around the 1.11 handle where we can find the confluence of the previous swing low level, the trendline and the 38.2% Fibonacci retracement level.
If we get a pullback into that support zone, we can expect the buyers to lean on the trendline to position for a rally into the 1.13 handle. The sellers, on the other hand, will want to see the price breaking lower to position for a drop into the 1.10 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that after the spike higher triggered by the dovish Powell’s speech, the price action has been tentative as the market awaits the release of key economic data next week. If we start to see another wave of buying though and the price breaks above the counter-trendline around the 1.1190, we can expect the bullish momentum to increase as more buyers will likely pile in for the rally into a new cycle high. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the latest US Jobless Claims figures, while on Friday, we conclude the week with the US PCE report.