Fundamental
Overview
The USD has been marginally
weaker recently due to lower than expected US inflation figures last week that
sent Treasury yields lower and made the market to price in higher chances of a
second rate cut by the end of the year.
We’ve also got lots of
whipsaws in the last couple of days caused by tariffs headlines. On Monday, the
greenback weakened across the board following a WSJ report saying that Trump would lay out the
trade vision but won’t impose tariffs yet.
Yesterday, on the other
hand, the US Dollar strengthened as Trump spoke to the media and said that he intends to impose 25% tariffs on Canada and Mexico next week.
Those gains were later erased, but Trump definitely brought more volatility.
On the EUR side, nothing
has changed in the meantime. 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 96% 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 trading near a key resistance zone around the 1.0450 level.
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 1.06 handle next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have an upward trendline defining the current bullish
momentum. From a risk management perspective, the buyers will have a better
risk to reward setup around the trendline to position for a break above the
resistance. The sellers, on the other hand, will want to see the price breaking
below the trendline to increase the bearish bets into new lows.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a break above the
resistance, while the sellers will pile in around these levels to position for
a pullback into the trendline. The red
lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we get the latest US Jobless Claims figures, while on
Friday we conclude the week with the Flash Eurozone and US PMIs.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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