Fundamental
Overview
The USD weakened across the
board last week following another soft US CPI report and benign Jobless Claims figures. The market not only fully
priced in a rate cut in September but also started to price in some chances of
a back-to-back rate cut in November.
Overall, we had a
goldilocks data release with an economy that is slowing but still growing. This
should support the soft-landing narrative and be positive for the risk
sentiment.
The EUR, on the other hand,
keeps on gaining against the US Dollar mainly because of the risk-on sentiment
as the US data continues to support at least two rate cuts from the Fed without
sending recessionary signals.
On the monetary policy
front, the ECB members continue to repeat that they will wait for the data throughout
summer before deciding on a rate cut in September. So, the ECB rate decision
this week should be a non-event.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD is struggling to break above the 1.09 level and extend the
rally into the 1.10 handle. This is where the sellers are stepping in with a
defined risk above the level to position for a drop back into the 1.0812 support. The buyers will want to see the price
breaking higher to increase the bullish bets into the 1.10 level next.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that from a risk management perspective, the buyers will have a better risk
to reward setup around the trendline at the 1.0840 level. We can also
see that we have another steeper trendline around the 1.0885 level. Some
aggressive buyers might lean on it or split their orders in half to avoid
missing a possible rally from these levels. The sellers, on the other hand,
will likely pile in at every break lower.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see the recent price action and we can notice that the momentum has indeed
waned at the 1.09 handle. Today we get the US Retail Sales data and that could
provide either a spike to the upside or a break below the trendline and a
possible pullback into the next trendline around the 1.0840 level. The red
lines define the average daily range for today.
Upcoming
Catalysts
Today we get the US Retail Sales report. Tomorrow, we have Fed’s Waller
speaking. On Thursday, we conclude with the ECB rate decision and the latest US
Jobless Claims figures.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
