The USD has weakened across the board recently due to a more dovish than expected FOMC decision last week, where the Fed decided to signal a deeper QT cut starting in June and the Chairman of the Fed Powell has repeatedly pushed back on rate hike expectations. Additionally, data released Friday showed the Fed could actually keep rates high for longer as job and wage growth slow.
The Euro, on the other hand, gained ground mainly due to dollar weakness and some positive news on the growth front as PMIs continue to improve. The market has already fully priced in three ECB rate cuts this year, so this should no longer weigh much on the euro. The market will need something that gives it a reason to price in a change in the monetary policy of the Fed or the ECB in order to trigger another lasting development.
EURUSD Technical Analysis – Daily Timeline
EURUSD Daily
On the daily chart, we can see that EURUSD has climbed into the key trendline around the 1.08 handle following the weak US NFP report. The price was eventually rejected from the trendline and the market toned down the upside as the data hasn’t changed much and we still have the US CPI risk. Sellers will likely continue to pile in around these levels to position themselves for a fall to new lows, while buyers will want to see the price break higher to increase bullish bets to the handle. 1.09.
EURUSD Technical Analysis – 1 Hour Timeframe
EURUSD 1 hour
On the hourly chart we can see that from a risk management perspective, buyers will have a much better risk of reward around the 1.0727 level where we can find the confluence of the bullish minor trendline and the level Fibonacci retracement of 61.8%. Sellers, on the other hand, will want to see the price fall lower to invalidate the bullish setup and increase bearish bets to new lows.
Upcoming catalysts
This week is rather empty in terms of data, with the only notable releases remaining being the US jobless claims on Thursday and the University of Michigan Consumer Sentiment Survey on Friday. They are unlikely to change market expectations that much, however, so price action could remain tepid heading into next week’s U.S. CPI, although the bias could remain generally bullish due to the feeling of risk.
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