The miss in the US CPI report
last week triggered a heave US Dollar selling across the board. The market
started to price out the more hawkish expectations and now sees the July hike
as the last one for this cycle. Moreover, the resilient labour market and the
rising consumer sentiment point to
a soft-landing scenario where inflation comes down to target without affecting
too much economic growth. In fact, even the US Retail Sales recently
beat expectations on the Control Group, which is a better gauge of consumer
spending.
The ECB has already committed to a rate hike in
July, so even if the data disappoints going forward, it’s more likely to affect
the September decision rather than the July one. In fact, the ECB members keep
repeating that the September hike is more uncertain, and it will depend on the
incoming data.
EURUSD Technical Analysis –
Daily Timeframe
EURUSD Daily
On the daily chart, we can see that EURUSD had a
massive rally since bottoming out on the red 21 moving average near the
1.08 handle. After breaking out of the upper bound of the rising wedge pattern
though, the bullish momentum started to wane and the price is now pulling back
into the blue 8 moving average and the top trendline of the
pattern.
EURUSD Technical Analysis –
4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can see that the price has
broken below the blue upward trendline that defined the rally since the
breakout of the descending triangle. This led to a pullback into the top
trendline of the wedge pattern and we can see that we have also the 23.6% Fibonacci retracement level
for confluence. We
should see the buyers stepping in here with a defined risk below the trendline
to target new higher highs. On the other hand, if the price breaks below the
trendline, it might mean that the upside breakout was just a fakeout and could
lead to a massive downside into the 1.08 handle with the sellers piling in
aggressively.
EURUSD Technical Analysis –
1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can see more
closely the current consolidation just above the top trendline and we can also
notice that the price has already bounced on the 23.6% Fibonacci retracement
level. If the uptrend has already restarted, we should see the price breaking
above the most recent higher low at 1.1240 and see the buyers piling even more
to target the 1.15 handle.
Upcoming Events
Today the main event
will be the US Jobless Claims report. The market is still trading on the
soft-landing hopes, so a small miss to the expectations is unlikely to cause
big movements and it may even be an opportunity to buy the dip. We should focus
more on big deviations from the expected numbers. In fact, a beat should give
the USD some support and a miss may weaken it even more as the market would
bring forward rate cuts expectations.