Fundamental
Overview
The USD is weaker across
the board following the soft US PPI report yesterday. The market pricing is now
showing a total of 31 bps of easing by year end compared to 24 bps before the
PPI. The focus remains on the US CPI report today.
A hot report will likely
cause some trouble in the markets with the stock market looking as the most
vulnerable right now.The best outcome would be a soft
report given the overstretched moves in the markets caused by the repricing in
rate cuts expectations.
That would likely reverse
most of the recent trends and trigger a correction in Treasury yields and
therefore in the US Dollar.
On the EUR side, the latest
Eurozone CPI came in line with forecasts
although the Core measure remained pretty sticky around 2.7%. As a reminder, the
ECB cut the
policy rate by 25
bps at the last decision bringing it to 3.00%.
The central bank removed
the passage saying that “it will keep policy rates sufficiently restrictive for
as long as necessary” implying that upside inflation risks have faded. The
market sees a 98% probability of a rate cut at the upcoming meeting and a total
of 88 bps of easing by year end.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD is off from the lows as the tariffs news and the US PPI
weakened the US Dollar across the board. From a risk management perspective,
the sellers will have a better risk to reward setup around the major trendline to position for further downside.
The buyers, on the other hand, will want to see the price breaking higher to
increase the bullish bets into new highs.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have an important resistance zone around the 1.0335 level where
the price got rejected from several times in the past weeks. That’s where we
can expect the sellers to step in with a defined risk above the level to
position for a drop back into the lows. The buyers, on the other hand, will
want to see the price breaking higher to increase the bullish bets into the
major trendline targeting a break above it.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have a minor upward trendline defining the current bullish momentum
on this timeframe. The buyers will likely keep on leaning on it to position for
further upside, while the sellers will look for a break lower to target new
lows.
The red lines define the average daily range for today although the price can
easily extend beyond those levels given that we have the US CPI report ahead
and it’s a key event.
Upcoming
Catalysts
Today, we have the US CPI report, while tomorrow we get the latest US Jobless
Claims figures.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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