Fundamental
Overview
The USD has been weak
almost across the board since the NFP report as the softer than expected data
triggered a quick dovish repricing and a change in stance for many Fed members.
The market is pricing 57
bps of easing by year-end compared to just 35 bps before the NFP release. It’s
highly likely that more benign data will see Fed Chair Powell opening the door
for a cut in September at the Jackson Hole Symposium.
The focus now turned to the
US CPI report. We saw some dollar strength yesterday which could have been
hedging activity into the risk event. The recent Fedspeak suggests that a rate
cut in September might be unavoidable, so we might need very hot inflation data
to change their mind (and of course a good NFP report in September).
On the EUR side, we haven’t
got anything new in terms of fundamentals after the US-EU trade deal that set
tariffs at 15%. Many ECB members are now taking a much more neutral approach to
rate cuts. They will need significant negative data to force them to cut
further. The market is pricing just 11 bps of easing by year-end so another
rate cut has less than 50% chance of happening.
EURUSD Technical
Analysis – Daily Timeframe
EURUSD Daily
On the daily chart, we can
see that the key resistance around the 1.1575 level got breached
last week and we extended the gains as more Fed members turned dovish. We have
now pulled back into the resistance
now turned support and this is where the CPI will likely decide the next
direction. Buyers will look for a bounce and a rally into the 1.1750 level, while
the sellers will look for a break lower and target new lows.
EURUSD Technical
Analysis – 4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can
see more clearly the 1.1590 support zone. This is where we can expect the
buyers to step in with a defined risk below the zone to position for a rally
into the major downward trendline
around the 1.1750 level. The sellers, on the other hand, will look for a break
lower to pile in for a drop into the 1.14 handle.
EURUSD Technical
Analysis – 1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, there’s not much we can add here as the buyers will
look for a bounce, while the sellers will target a break. The red lines define
the average daily range for today.
Upcoming
Catalysts
Today we have the US CPI report. On
Thursday, we get the US PPI and the US Jobless Claims figures. On Friday, we
conclude the week with the US Retail Sales and the University of Michigan
Consumer Sentiment report. Focus also on Fedspeak, especially after the US CPI
data.
