Fundamental
Overview
The USD has been unusually
resilient this week despite lots of negative catalysts. The US PPI and Core CPI came in on the softer side which saw the
market increasing the easing expectations from 24 bps before the data to 37 bps
after.
Moreover, yesterday Fed’s Waller delivered some surprisingly dovish
comments saying that a rate cut could come in the first half of this year if
the inflation data continues to show improvement and that a March cut cannot be
completely ruled out.
The market pricing
increased to 42 bps by year end as a result which is now much closer to the 50
bps projected by the Fed.
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 95% probability of a rate cut at the upcoming meeting and a total
of 97 bps of easing by year end.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD is consolidating near the 1.0335 resistance.
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 the pair couldn’t break above the key 1.0335 resistance zone even after the softer than
expected US inflation data and the dovish comments from Fed’s Waller.
This is where we can expect
the sellers to step in with a defined risk above the resistance 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 support zone around the 1.0260 level where the price
got rejected from several times in the past weeks. The buyers will likely
continue to step in around the support to position for a break above the
resistance, while the sellers will look for a break lower to increase the
bearish bets into new lows. The red
lines define the average daily range for today.
Upcoming
Catalysts
Today, we have the US Housing Starts and Building Permits, and the US
Industrial Production and Capacity Utilization.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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