Fundamental
Overview
It looks like the market is
taking some breather after an incredible rally in the US Dollar. This week was
pretty empty on the data front, and we haven’t got any meaningful catalyst. The
main culprit for the US Dollar strength has been the rally in long term
Treasury yields.
The yield curve has been
bear-flattening which is what you would expect with higher growth and
potentially higher inflation expectations. There’s been a good argument that
the markets have been already positioning for a Trump victory which is expected
to strengthen the higher growth and less rate cuts expectations.
For now, this is the trend
and it’s generally a bad idea to fight such trends without a strong catalyst.
Unfortunately, we don’t have much left for October as the main events will be
in the first weeks of November when we will get the top tier economic reports,
the US elections and the FOMC decision.
On the EUR side, the ECB last week cut interest rates by 25 bps as
expected but didn’t offer anything new in terms of forward guidance as the
central bank remains data dependent and it’s not pre-committing to a particular
rate path.
The market is pricing an 83%
chance of another 25 bps cut in December with 17% probabilities of a larger 50
bps cut. Further ahead, the market sees the ECB cutting four more times in
2025.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD bounced off of the key swing level at 1.0777 as the buyers
stepped in with a defined risk below the level to position for a pullback into
the 1.10 handle. The sellers will want to see the price breaking lower to
increase the bearish bets into the 1.06 handle next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have the downward trendline defining the current bearish
momentum. The sellers will likely keep on leaning on it to position for new
lows, while the buyers will want to see the price breaking higher to increase
the bullish bets into the 1.10 handle.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that the price is trading right around the trendline now. There’s not much
we can add here as the sellers will look for a rejection, while the buyers will
look for a breakout to the upside. 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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