Fundamental Overview
The USD yesterday weakened across the board following soft US Jobless Claims and ISM Services PMI reports. Overall, the data didn’t change much in terms of interest rates expectations, but it reinforced the view that the Fed is going to deliver at least two rate cuts by the end of the year.
The EUR, on the other hand, has been under pressure mainly due to the US Dollar strength last week which has been influenced more by quarter-end flows rather than something fundamental. This week, the US Dollar is back on the defensive as the market continues to trade the soft-landing narrative.
Moreover, the Euro has found some support from the latest developments on the French elections front as Politico reported that hundreds of candidates from Macron’s camp and the left-wing alliance withdrew in an effort to keep the National Rally out ahead of the second round of voting this weekend.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD broke out of the consolidation beneath the key 1.0727 level, and after a brief retest, extended the rally into the 1.08 region helped by the weak US data.
The buyers will now want to see the price breaking above the 1.0812 level to increase the bullish bets into the 1.09 handle next. The sellers, on the other hand, will likely step in around this level to position for a break below the 1.0727 support with a better risk to reward setup.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the breakout of the recent descending triangle-like consolidation, the retest of the 1.0727 level where we had also the minor upward trendline for confluence, and then the rally into the 1.0812 resistance.
If we get a pullback from these levels, we can expect the buyers to lean on the trendline again to position for a break above the 1.0812 resistance with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking below the trendline and the 1.0727 support to increase the bearish bets into the 1.06 handle next.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have an interesting support zone around the 1.0775 level where we can find the confluence of the previous swing high, the 50% Fibonacci retracement level and another minor trendline.
This is where we can expect more aggressive buyers to step in to position for a break above the 1.0812 resistance with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets and provide the pullback into the next minor trendline around the 1.0750 level. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we conclude the week with the US NFP report where the data is expected to show 180K jobs added in June and the Unemployment Rate to remain unchanged at 4.0%.
