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.
• The US CPI
  yesterday came in line with expectations, so the market’s pricing remained
  roughly the same.
• The labour market
  displayed signs of softening although it remains fairly solid.
• Last week the ISM Services PMI and Jobless Claims
  surprised to the upside, which point to a resilient economy overall.
• The Fed members are leaning more towards a pause in
  September and the next decision will still be dictated by the economic data.
• The market doesn’t expect the Fed to hike at the
  September meeting, but there’s now basically a 50/50 chance of a hike in
  November.

EU:

• The ECB hiked by 25 bps at the
  last meeting and changed a line in the statement that leant more on the dovish
  side.
• President Lagarde just reaffirmed their data
  dependency and kept all the options on the table.
• Inflation measures
  did soften a bit lately but remain uncomfortably high.
• 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 pointing to a possible recession in the next 6 months.
• The message from ECB members has been mixed, but a
  recent leak flipped
  market’s expectations for today’s rate decision and the expectation now is for
  a 25 bps hike.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that we recently got
an important breakout of the bottom trendline that
opened the door for a fall into the 1.05 handle. The price started to
consolidate a little after the breakout and now we might see a bigger pullback
into the trendline, which might end up in a classic “break and retest” pattern
before another selloff. In fact, we have some strong confluence around
the broken trendline as there’s the previous support now turned resistance, the red
21 moving average and the
1.08 handle.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
bearish setup with the Fibonacci retracement levels
adding more to the confluence around the broken trendline. This is where we can
expect the sellers to pile in with a defined risk above the top trendline and
target the 1.05 handle. The buyers, on the other hand, will need the price to
break above the top trendline around the 1.0850 level to invalidate the bearish
setup and change the trend.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that we
had a divergence with
the MACD right
after the breakout. This is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, we might see the pullback
into the 1.08 handle as the price should spike to the upwards following today’s
ECB rate decision, and that’s when the sellers should start fading the move as
the market is likely to “sell the fact”.

Upcoming Events

Today we have many important events beginning with
the ECB rate decision where the central bank is expected to hike by 25 bps
following a leak on Tuesday which revealed that the ECB was going to revise its
inflation forecasts to the upside. Later in the day we will get the US Jobless
Claims, Retail Sales and PPI data which might boost the USD even more if the
data comes out on the strong side. Tomorrow, we conclude the week with the
University of Michigan Consumer Sentiment report.

See also the video below

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