Fundamental
Overview
Yesterday, the USD got a
boost from a higher than expected US CPI report but gave back the gains pretty quickly.
There are two reasons for such a reaction.
The first is that at the
same time of the US CPI release we got the US Jobless Claims figures which
jumped to the top of their yearly ranges. The culprit was attributed mainly to
Hurricane Helene and the strikes.
The second reason is that
the market was already positioned for a higher than expected reading as we’ve
been seeing consistent upside in Treasury yields and the US Dollar in the days
leading up to the release. Therefore, we got kind of a “sell the fact” reaction.
On net, it was a slightly
hawkish report but it looks like the market needs some more reasons to keep
bidding the US Dollar now that the market’s pricing is back in line with the
Fed’s projections.
On the EUR side, the market
has fully priced in a back-to-back 25 bps cut in October from the ECB following
the weak data and dovish comments from ECB officials.
EURUSD Technical
Analysis – Daily Timeframe
EURUSD Daily
On the daily chart, we can
see that EURUSD bounced around the 1.09 handle following the US CPI release and
it’s now looking like we could get a pullback into the 1.10 handle where we can
find the confluence
of the broken trendline and a key swing level.
That’s where we can expect
the sellers to step in with a defined risk above the 1.10 handle to position
for a drop into the 1.08 handle next, while the buyers will look for a break to
the upside to increase the bullish bets into the 1.12 handle.
EURUSD Technical
Analysis – 4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can
see that we had a downward trendline that was defining the bearish momentum.
The price broke above the trendline this morning in a potential signal of more
upside to follow.
The buyers will likely pile
in around these levels to position for a pullback into the 1.10 handle. The
sellers, on the other hand, will want to see the price falling back below the
trendline to position for new lows.
EURUSD Technical
Analysis – 1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can
see that we have a minor resistance
around the 1.0955 level which is the high set on the US CPI reaction. A break
above this level will likely give the buyers more confidence to target the 1.10
handle.
The sellers, on the other
hand, will likely pile in around these levels with a defined risk above the
resistance to position for a drop into new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we conclude the week with the US PPI and the University of Michigan
Consumer Sentiment survey.
