Fundamental Overview
The USD came under renewed pressure last Thursday following an in-line US CPI report and surprisingly weak initial jobless claims. The jobless claims data stole the show as initial claims jumped to a new cycle high and the highest level since 2021.
On further analysis, the claims data might have been just a blip as it was negatively skewed by an unusually large spike in Texas. Nevertheless, the data kept the weakening labour market narrative intact and therefore solidified the expectations for three rate cuts by year-end.
Overall, if one zooms out, the US dollar has been mostly rangebound even though the dovish bets on the Fed kept weighing on the currency. Part of that could be the fact that the bearish positioning on the dollar could be overstretched and we might be at the peak of the dovish pricing.
In fact, if the rate cuts trigger stronger economic activity in the next months, the rate cuts in 2026 could be priced out and support the dollar. Nevertheless, the trend is still skewed to the downside, and we might need strong data to reverse it.
On the EUR side, the ECB left interest rates unchanged at the last meeting as widely expected with limited forward guidance other than the usual data-dependent approach. President Lagarde made it pretty clear that the central bank finished cutting rates after she said that growth risks are balanced and the disinflationary process was over. The market sees just 4 bps of easing by year-end and 11 bps in total by the end of 2026.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD got rejected near the 1.1789 level and then got back into the same old range. If we get another spike into the 1.1789 level, we can expect the sellers to step in with a defined risk above the level to position for a drop back into the 1.16 support. The buyers, on the other hand, will look for a break higher to target an extension into the 1.1831 level next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is trading right at the top of the range around the 1.1745 level. This is where we can expect the sellers to step in with a defined risk above the range to position for a drop into the 1.16 support. The buyers, on the other hand, will look for a break higher to extend the rally into the 1.1789 level next.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much else we can add here as the sellers will continue to pile in around the top of the range to position for the drop into the 1.16 support, while the buyers will look for a break higher to target the 1.1789 level next. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the US Retail Sales data. On Wednesday, we have the FOMC policy announcement. On Thursday, we get the lates US Jobless Claims figures. Keep also an eye on WSJ’s Timiraos as he could signal a 50 bps cut in his Fed preview.
