Fundamental Overview
The USD finished last week at the lows despite the lack of meaningful catalysts. Overall, it just maintained the bearish bias triggered by Powell’s dovish tilt at the Jackson Hole Symposium.
This week, traders will be focused on the US labour market data, culminating in the NFP report on Friday. In fact, the data will influence interest rates expectations greatly. Right now, the market is pricing an 89% probability of a rate cut in September and a total of 55 bps of easing by year-end.
Strong data might take the probability for a September cut towards a 50/50 chance but will certainly see a more hawkish repricing further down the curve and likely support the dollar. Soft data, on the other hand, will likely see traders increasing the dovish bets with a third cut by year-end being priced in and weighing on the greenback.
On the EUR side, the currency weakened across the board in the first part of last week due to some French political drama. But as it usually happens with political stuff, the market quickly reversed the moves and eventually we got back to the levels seen after Powell’s dovish tilt.
In terms of monetary policy, nothing has changed. 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 8 bps of easing by year-end and 19 bps by the end of 2026, which indicates that the easing cycle might have already ended.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD eventually rallied all the way back to the major trendline around the 1.1740 level. This is where we can expect the sellers to step in with a defined risk above the trendline to position for a drop back into the 1.16 support. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.1790 level next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price is getting rejected around the trendline and the most recent high around the 1.1740 level. This is going to be a strong resistance zone. The sellers have a great risk to reward setup here with a stop above the high and a target at the 1.16 support. The buyers, on the other hand, will look for a break higher to invalidate the bearish setup and extend the rally into the 1.1790 level next.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor upward trendline defining the bullish momentum on this timeframe. If we get a pullback, the buyers will likely lean on the trendline with a defined risk below it to keep pushing into new highs. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 1.16 support. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the Eurozone CPI and the US ISM Manufacturing PMI. On Wednesday, we have the US Job Openings data. On Thursday, we get the US ADP, the latest US Jobless Claims figures and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report.
