Fundamental Overview
The USD yesterday came
under renewed pressure following the beat in the US ISM Services PMI where the data showed that the last
month drop was just a blip and overall we have a resilient economy with lower
inflationary pressures. The data continues to reinforce the narrative that the
next move is more likely to be a rate cut, and that inflation is likely to keep
coming back to target. This could keep weighing on the greenback as the
positive risk sentiment due to the pickup in global growth is generally a
headwind.
The EUR, on the other hand,
has been gaining ground against the USD mainly because of the Dollar weakness amid
the general risk-on sentiment regime. Moreover, the recent data from the
Eurozone has been generally good with a pickup in the PMIs, high wage growth and
strong labour market. Today, the ECB is expected to cut rates by 25 bps but the
focus will be on their forward guidance, although I don’t expect them to
pre-commit to anything and just stress data dependency.
EURUSD Technical
Analysis – Daily Timeframe
EURUSD Daily
On the daily chart, we can
see that the price action in the EURUSD pair has been mostly rangebound between
the 1.08 support and the 1.09 resistance as the risk sentiment
has been mixed but with a bullish tilt.
The buyers will want to see
the price breaking higher to pile in for a rally into the 1.10 handle. The
sellers, on the other hand, will likely keep on leaning on the resistance with
a defined risk above it to position for a drop back into the 1.08 support.
EURUSD Technical
Analysis – 4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can
see more clearly the rangebound price action with the multiple failed tries to
break above the resistance. The overall trend remains bullish, and the positive
risk sentiment should support the Euro. The risk is that the ECB sounds more
dovish than expected, in which case we could see a quick drop into the 1.08
support where the buyers will likely step in to buy the dip with a better risk
to reward setup.
The NFP tomorrow is also a
risk as a hot report could give the USD a boost in the short term but without
hot wage growth figures, the dip buyers should still come up on top. Conversely,
very weak numbers might depress the risk sentiment and lead to safe haven flows
and support the greenback.
EURUSD Technical
Analysis – 1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can
see that we have a strong level around 1.0860 where the price reacted from
several times in the past days. If the price were to fall below this level on
the ECB decision, we might see the algos exacerbating the move and take the pair
into the 1.08 support zone.
That’s where we have also
the lower limit of the average daily range, so we can expect the buyers to buy
the dip. Conversely, a rally might extend to the 1.0920 level but without a
very hawkish language, we should see the pair eventually coming back toward the
1.0880 region as the market will look forward to the NFP report next.
Upcoming
Catalysts
Today we have the ECB Policy Decision and the US Jobless Claims. Tomorrow, we
conclude the week with the US NFP report.
