Fundamental Overview
The USD has strengthened since Friday as Treasury yields bounced following some positive Trump’s comments on China. Overall, the US dollar performance has been mixed as markets have been driven by quick changes in risk sentiment given the lack of US data.
On the domestic side, the US government shutdown continues to delay many key US economic reports. Tomorrow though, we will get the US CPI data since it’s crucial for social security benefits adjustment required by November.
The dollar “repricing trade” needs strong US data to keep going, especially on the labour market side, so any hiccup on that front should keep weighing on the greenback.
Since Trump’s threat of massive tariffs on China, the market pricing turned more dovish with 126 bps of easing seen by the end of 2026 (the Fed projected just 75 bps). Therefore, if we de-escalate further and the US data picks up, there’s plenty of room for the greenback to appreciate.
On the EUR side, the single currency found some support last week as the French political risk eased after Lecornu survived the no-confidence vote. On the monetary policy side, nothing has changed. The ECB is not expected to adjust rates for a long time unless we get significant deviation from their inflation target.
In fact, the vast majority of ECB members is comfortable with the current rate setting and will not respond to small or short-term deviations from their target barring a clear shock in the economy.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD rolled back to the key support zone around the 1.1573 level. This is where we can expect the buyers to step in with a defined risk below the support to position for a rally back into the 1.18 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 1.14 handle next.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more clearly the recent price action with the euro appreciating on lower French political risk and then giving back everything as the US dollar strengthened after Trump’s comments. There’s not much else we can add here as the buyers will look for a bounce around the support, while the sellers will target a breakout.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we might be forming a range at the support zone with the minor resistance standing around the 1.1620 level. As a reminder, we have the US CPI and US Flash PMIs tomorrow, so there’s a risk of seeing some fakeouts. The red lines define average daily range for today.
Upcoming Catalysts
Tomorrow we will get the US CPI report, and the Eurozone and US Flash PMIs.
