US:
- The Fed left interest rates unchanged as
expected at the last meeting. - The macroeconomic projections were revised higher
as the economy showed much stronger resilience than expected and the Dot Plot
showed that the majority of members still expects another rate hike by the end
of the year with less rate cuts in 2024. - Fed Chair Powell
reaffirmed their data dependency but added that they will proceed carefully as
they are trying to find the optimal level of rates. Powell also added that the
soft landing is not the base case at the moment, although they are aiming for
it. - The latest US Core PCE
came
in line with expectations with disinflation continuing steady. - The labour market
displayed signs of softening although it remains fairly solid as seen also last
week with a strong beat in Jobless Claims and this
week with the beat in Job Openings. - The ISM Manufacturing PMI beat
expectations while the ISM Services PMI came in
line with forecasts in another sign that the US economy remains resilient. - The miss in the ADP report
yesterday led to some USD weakness which might continue if the data in the next
couple of days misses as well. - The market doesn’t expect the Fed to hike again at
the moment.
EU:
- The ECB hiked by 25 bps at the
last meeting and added a line in the statement that hinted to the end of the
tightening cycle. - President Lagarde didn’t push back against the idea
of them having reached already the terminal rate and highlighted the slowdown
in Eurozone economy. - The Eurozone CPI missed
across the board last week supporting the ECB’s stance. - The labour market remains
very tight with the unemployment rate hovering at record low levels. - Overall, the economic data lately has been showing
signs of fast deterioration in the economy. - Most ECB members are leaning towards keeping rates
higher for longer now. - The market doesn’t expect the ECB to hike anymore.
EURUSD Technical Analysis –
Daily Timeframe
EURUSD Daily
On the daily chart, we can see that the EURUSD pair
has pulled back recently with the miss in the ADP report yesterday giving it a
bit of relief after a series of strong US data. From a risk management
perspective, the sellers would have a much better risk to reward setup shorting
from the resistance around
the 1.0620 level where we have the confluence with the
trendline, the
38.2% Fibonacci retracement level
and the red 21 moving average. The
buyers, on the other hand, will need the price to break above the trendline to
change the trend around.
EURUSD Technical Analysis –
4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can see that we have a divergence with the
MACD right
around the key 1.05 support. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. In this case, we might see a pullback
into the previously mentioned 1.0620 resistance zone, so the buyers are likely
to pile around here to position for a rally into the resistance.
EURUSD Technical Analysis –
1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can see that the
market structure on this timeframe is bullish as the price has made a new
higher high and the moving averages have crossed to the upside. The buyers
should lean on the support around the 1.0495 level with a defined risk below it
to target the 1.0620 level. More conservative buyers may want to wait for the
price to break above the recent high at 1.0532 before joining the rally. The
sellers, on the other hand, will want to see the price breaking below the
1.0495 support to pile in again and extend the drop to new lows.
Upcoming Events
Today we have the Jobless Claims report, which
continues to show a solid labour market and given the reaction to the miss in
the ADP yesterday, we can expect a rally in case of a miss and a drop in case
of a beat. Tomorrow, it will be the time for the NFP report which is the only
one the Fed will see before its next rate decision.