Fundamental Overview
The USD sold off across the board on Friday following a softer than expected NFP report. Overall, the data wasn’t as bad as one might think by just looking at the reaction but given that we were positioned for a strong report and the pricing got more hawkish after the Fed’s decision, the weaker data was enough to trigger a quick repricing.
In fact, the market is now pricing 59 bps of easing by year-end compared to just 35 bps before the NFP release. That’s a pretty quick change of heart. Over the weekend, we have Fed’s Williams opening the door for a cut in September and yesterday, Fed’s Daly echoed such sentiment. The NFP clearly made them a bit more worried, and a September cut is now basically a done deal.
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.
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 14 bps of easing by year-end, so another rate cut has basically a 50% chance of happening.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that we have a key resistance around the 1.1575 level. This is where the sellers are stepping in with a defined risk above the level to position for a drop into the 1.1065 level next. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into a new cycle high.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, there’s not much we add here as the sellers will continue to lean on the resistance to keep pushing into new lows, while the buyers will look for a break higher to increase the bullish bets into new highs.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support zone around the 1.15-ish handle. If the price gets there, we can expect the buyers to step in with a defined risk below the zone to position for a break above the 1.1575 resistance. The sellers, on the other hand, will look for a break lower to increase the bearish bets into new lows. The red lines define the average daily range for today.
Upcoming Catalysts
Today we have the US ISM Services PMI and on Thursday, we get the latest US Jobless Claims figures.
