FUNDAMENTAL OVERVIEW
USD:
The US Dollar weakened across the board yesterday following the soft US core inflation data but the initial moves were eventually faded and the greenback gained. It’s hard to explain such a price action but we got also renewed Trump’s threats against Iran following the US CPI report which weighed on the risk sentiment and could have been the reason for the comeback.
In terms of market pricing, traders firmed up bets on Fed rate cuts with the total easing by year-end increasing to 54 bps from 52 bps before the CPI release. Fed members continue to support the current patient and data-dependent stance. The outlook for the USD remains neutral/bearish for now.
Today, the focus will be on a potential US Supreme Court decision on Trump's tariffs. If tariffs get struck down, we might see general risk on sentiment as initial reaction and that could weigh on the US Dollar in the short-term. On the other hand, if tariffs are kept in place, it shouldn't change much given that the market got already used to tariffs.
EUR:
On the EUR side, the ECB remains in a neutral stance reaffirming its data-dependent and meeting-by-meeting approach to policy decisions. ECB members continue to repeat that the current policy is appropriate, and they won’t respond to small or short-term deviations from their 2% target. The data has been supporting the central bank’s neutral stance, with inflation data recently surprising to the downside.
EURUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that EURUSD rallied into the key 1.17 resistance after the DOJ subpoena news but eventually erased all the gains as the sellers piled in to position for new lows. The price remains confined between the 1.1615 level and the trendline. The sellers will likely continue to lean on the trendline to keep pushing into new lows, while the buyers will look for a break higher to open the door for a move into the 1.18 handle next.
EURUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, there’s not much we can glean from this timeframe given that the only key technical levels remain the trendline and the 1.1615 level. We need to zoom in to see some more details.
EURUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can see that we have a minor downward trendline defining the current bearish momentum. The sellers will likely lean on the trendline with a defined risk above it to position for a drop into new lows, while the buyers will look for a break higher to pile in for a rally into the major trendline targeting a breakout. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the November US Retail Sales and US PPI reports, so it’s going to be old data. The market will likely focus on the potential US Supreme Court decision on Trump’s tariffs. Tomorrow, we get the latest US Jobless Claims figures.
