US:

• The Fed hiked by 25 bps as
  expected and kept everything unchanged at the last meeting.
• Fed Chair Powell reaffirmed their data dependency
  and kept all the options on the table.
• Inflation measures
  since then showed further disinflation.
• The labour market
  displayed signs of softening although it remains fairly tight.
• Overall, the economic data started to surprise to
  the downside lately.
• The Fed members are leaning more towards a pause in
  September.
• Yesterday, we got a big beat in the ISM Services PMI.
• The market pricing now sees a 50/50 chance for a
  November hike.

EU:

• The ECB hiked by 25 bps and
  changed a line in the statement that leant more on the dovish side.
• President Lagarde didn’t hint to what we can expect
  next and, in line with the Fed, just reaffirmed their data dependency and kept
  all the options on the table.
• Inflation measures
  did soften a bit but remain uncomfortably high.
• The labour market remains
  very tight with the unemployment rate stuck at record low levels.
• Overall, the economic data has been showing signs
  of fast deterioration in the economy pointing to a possible recession in the
  next 6 months.
• The message from ECB members has been mixed but
  leaning more towards a pause.
• The market doesn’t expect the ECB to hike at the
  upcoming meeting.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD recently
tried to break out of the downward trendline, but the
price got smacked back down soon after leaving behind a fakeout and causing a
big selloff that led to the breakout of the bottom trendline. This breakout opened
the door for a fall into the 1.0515 level and the sellers are now in firm
control.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
fakeout, which is generally a reversal pattern, and the impulses to the
downside with the most important levels. The pair is clearly in a downtrend as
the price has been printing lower lows and lower highs and the moving averages are
crossed to the downside.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
had a divergence with
the MACD with
the last leg lower. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we got a pullback into the
trendline and the 38.2% Fibonacci
retracement level where the sellers piled in with a
defined risk above the trendline to position for a fall into the 1.0515 support.

If the price breaks below the recent low,
we should see even more selling coming into the market and push the price to
new lows. The buyers, on the other hand, will need the price to break above the
trendline to invalidate the bearish setup and start targeting new higher highs,
but ultimately, they will need the price to break above the major downward
trendline around the 1.08 handle to reverse the main downtrend.

Upcoming Events

Today we will have the last important US economic
data for this week: the US Jobless Claims report. We saw just yesterday that
strong US data is tailwind for the US Dollar as that raises the chances that
the Fed might need to do more. So, if we get good data, we should see more USD
strength, while bad data should weigh on the greenback in the short term.

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