Last week, the US CPI came basically in line with expectations, but the good news is that the Core M/M reading once again printed at 0.2%. The less good news is that the US Initial Claims spiked higher, but Continuing Claims remained solid. We have already seen Claims spiking higher in the past months, so it shouldn’t be worrying yet. The long-term inflation expectations in the University of Michigan report ticked lower, so on the data side the soft-landing narrative was supported. The US Dollar, nonetheless, appreciated across the board as the attention may have turned already on the next data given the higher energy prices and China starting to stimulate more.
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 has broken all the key support levels and extended the fall into the 1.08 territory. The next big level will be the swing low at 1.0832 where we can expect the buyers to step in and target the 1.1033 resistance. The bias remains bearish as the moving averages have crossed to the downside and the price keeps printing lower lows and lower highs.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bearish momentum is weakening as we are starting to see a divergence with the MACD. This is generally a sign that a pullback or reversal may be due. If the price breaks above the resistance zone around the 1.0940, then we can expect an extension to the 1.1033 level.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the resistance zone around the 1.0940 has the confluence with the 61.8% Fibonacci retracement level and the previous swing support turned resistance. The sellers are likely to pile in here with a defined risk above the zone to target the 1.0832 level. The buyers, on the other hand, will want to see the price breaking higher to pile in and target the 1.1033 resistance.
Upcoming Events
This week is a bit empty on the data front. Today we will see the latest US Retail Sales report where the USD is likely to appreciate in case of a beat and pull back in case of a miss. The US Jobless Claims on Thursday is likely to be the main event of the week as another big miss may cause recessionary fears and send the market into risk off, while strong data should keep the USD strong as any dovish bet should be put aside.
See also the video below:
