Fundamental Overview
The USD started the week on a positive note as the risk of a hawkish Powell has been keeping the markets on edge. We’ve also seen some downside in equities without any fundamental catalyst, which might indicate some profit-taking and hedging into the Jackson Hole event.
The recent data shouldn’t give Powell any conviction to pre-commit to a rate cut in September as the Jobless Claims data continued to improve and the inflation readings have increased further, so the NFP report in September is going to be crucial. The market trimmed its aggressive rate cut bets and we are now back at pricing around 52 bps of easing by year-end.
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 10 bps of easing by year-end, which still looks delusional given today’s Eurozone Flash PMIs.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD is trading right in the middle of a major trendline around the 1.1750 level and a key support around the 1.1572 level. There’s not much we can glean from this timeframe as the sellers would have a better risk to reward setup around the trendline, while the buyers would be better off stepping in around the support. Therefore, we need to zoom in to see some more details.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a minor downward trendline defining the bearish momentum on this timeframe. The sellers will likely continue to lean on the trendline to keep pushing into the minor support around the 1.16 handle, while the buyers will look for a break higher to pile in for a rally into the major trendline next.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add here as the sellers will look for shorts around the trendline, while the buyers will either wait for a drop into the 1.16 support or a break above the trendline to initiate longs. The red lines define the average daily range for today.
Upcoming Catalysts
Today we get the latest US Jobless Claims figures and the US Flash PMIs. Tomorrow, we conclude the week with Fed Chair Powell speech at the Jackson Hole Symposium.
