Fundamental
Overview
The US Dollar has come back
under pressure recently as we got a couple of soft US data. The US ISM Manufacturing PMI disappointed the market as it came
lower than expected and the new orders index dropped further into contraction.
The US
Job Openings yesterday showed some more cooling as the data missed
expectations by a big margin. The Treasury yields fell as a consequence and
weighed on the greenback.
In fact, the recent
appreciation of the EUR has been mostly driven by the US Dollar side of the
equation. From a monetary policy perspective, there’s now a 50/50 chance of
either a 25 or 50 bps cut at the upcoming FOMC meeting, so the NFP report
tomorrow will decide by how much the Fed is going to cut. For the ECB, the market sees a 99% probability
of a 25 bps cut at the upcoming meeting with a total of 60 bps of easing by
year-end.
EURUSD Technical
Analysis – Daily Timeframe
EURUSD Daily
On the daily chart, we can
see that EURUSD eventually fell below the 1.1136 level and extended the drop
into the 1.1025 level as more sellers piled in. The target for the sellers
should be the major trendline
around the 1.09 handle. The buyers, on the other hand, will likely step in
around the trendline to position for a rally into the 1.13 handle with a better
risk to reward setup.
EURUSD Technical
Analysis – 4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can
see that after breaking below the minor upward trendline the bearish momentum
increased as more sellers piled in and the buyers squared their positions. The
price is now testing a strong resistance
zone around the 1.11 handle where we can find the confluence of the previous swing low level and
the 38.2% Fibonacci retracement level.
We can expect the sellers
to step in with a defined risk above the resistance to position for a drop into
the major trendline with a better risk to reward setup. The buyers, on the
other hand, will want to see the price breaking higher to increase the bullish
bets into new highs.
EURUSD Technical
Analysis – 1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can
see that we have a counter-trendline defining the current bullish momentum. In
case we get a rejection from the resistance, the buyers will likely lean on it
to position for a break above the resistance. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into new
lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US ADP, the US Jobless Claims and the US ISM Services PMI. Tomorrow,
we conclude the week with the US NFP report.