Fundamental
Overview
On Wednesday, the Fed
finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.
The larger cut was framed
as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by
the end of the year and less than the market expected in 2025.
The US Dollar didn’t get a boost
despite the rise in Treasury yields. Now that the decision is behind us, the
focus will be on the economic data.
If we start to see an
improvement, then Treasury yields will likely continue to rise and lead to a
reprising in the dovish expectations supporting the greenback in the short-term.
Conversely, if the data
weakens, the market will likely go ahead with expecting more 50 bps cuts by
year-end and weighing on the US Dollar.
On the EUR side, the ECB speakers seem to prefer a rate cut in December while the market is pricing a 68% chance of a cut in October nonetheless. The central bank is data-dependent, so that’s what will drive their decisions.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD is back around the 1.12 handle after some choppy price action
following the Fed’s decision. From a risk management perspective, the buyers
would have a much better risk to reward setup around the trendline,
although a break of the high will likely see the bullish momentum increasing. The
sellers, on the other hand, will likely step in around these levels to position
for a drop into the trendline.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a consolidation right around the 1.1155 level. This might act
as kind of a barometer with the price staying above being more bullish and
staying below being more bearish.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much we can add as the price action has been very choppy and fundamentally
there’s also a good chance to see some strengthening in the USD if the data
starts to improve. The red lines define the average daily range for today.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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