The USD weakened across the board recently due to a more dovish than expected FOMC decision last week where the Fed decided to signal a bigger QT taper beginning in June and the Fed Chair Powell pushing back repeatedly against rate hike expectations. Moreover, the data on Friday showed that the Fed might indeed just keep rates higher for longer as job and wage growth soften.
The EUR, on the other hand, has been gaining ground mainly because of the USD weakness and some positive news on the growth side as the PMIs continue to improve. The market has already fully priced in three rate cuts for the ECB this year, so that shouldn’t weigh much on the EUR anymore. The market will need something to give it a reason to price in a change in the Fed’s or ECB’s monetary policy to trigger another sustained move.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD spiked into the key trendline around the 1.08 handle following the soft US NFP report. The price eventually got rejected from the trendline and the market faded the spike as the data didn’t change much and we still have the US CPI risk ahead. The sellers will likely keep piling in around these levels to position for a drop into new lows, while the buyers will want to see the price breaking to the upside to increase the bullish bets into the 1.09 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that from a risk management perspective, the buyers will have a much better risk to reward setup around the 1.0727 level where we can find the confluence of the upward minor trendline and the 61.8% Fibonacci retracement level. The sellers, on the other hand, will want to see the price breaking to the downside to invalidate the bullish setup and increase the bearish bets into new lows.
Upcoming Catalysts
This week is pretty empty on the data front with just the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment survey on Friday being the only notable releases left. It’s unlikely that they will change the market’s expectations that much though, so the price action might remain tentative heading into the US CPI next week, although the bias might remain generally bullish because of the risk-on sentiment.
