The USD weakened
across the board recently due to a more dovish than expected FOMC decision last
week where the Fed decided to signal a bigger QT taper beginning in June and
the Fed Chair Powell pushing back repeatedly against rate hike expectations.
Moreover, the data on Friday showed that the Fed might indeed just keep rates
higher for longer as job and wage growth soften.
The EUR, on the
other hand, has been gaining ground mainly because of the USD weakness and some
positive news on the growth side as the PMIs
continue to improve. The market has already fully priced in three rate cuts for
the ECB this year, so that shouldn’t weigh much on the EUR anymore. The market
will need something to give it a reason to price in a change in the Fed’s or
ECB’s monetary policy to trigger another sustained move.
EURUSD
Technical Analysis – Daily Timeframe
On the daily
chart, we can see that EURUSD spiked into the key trendline
around the 1.08 handle following the soft US NFP report. The price eventually
got rejected from the trendline and the market faded the spike as the data didn’t
change much and we still have the US CPI risk ahead. The sellers will likely
keep piling in around these levels to position for a drop into new lows, while
the buyers will want to see the price breaking to the upside to increase the
bullish bets into the 1.09 handle.
EURUSD
Technical Analysis – 1 hour Timeframe
On the 1 hour
chart, we can see that from a risk management perspective, the buyers will have
a much better risk to reward setup around the 1.0727 level where we can find
the confluence
of the upward minor trendline
and the 61.8% Fibonacci
retracement level. The sellers, on the other hand, will want to see the
price breaking to the downside to invalidate the bullish setup and increase the
bearish bets into new lows.
Upcoming
Catalysts
This week is pretty empty on the data front with just the US
Jobless Claims on Thursday and the University of Michigan Consumer Sentiment
survey on Friday being the only notable releases left. It’s unlikely that they
will change the market’s expectations that much though, so the price action
might remain tentative heading into the US CPI next week, although the bias might
remain generally bullish because of the risk-on sentiment.
See the video below
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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