Fundamental Overview
The USD came under some pressure at the start of last week following the US CPI report as the data came mostly in line with expectations. In the following days though, we got some hottish data with the US PPI beating expectations by a big margin, the US Jobless Claims improving further and the inflation expectations in the UMich survey surprising to the upside.
Overall, we ended the week basically flat on the US dollar as the aggressive dovish expectations on the Fed got trimmed a bit. Nevertheless, given the overreaction from the Fed members to the last soft NFP, a September cut looks unavoidable now and only a hot NFP report in September might get us to a 50% probability (although it would certainly diminish expectations for rate cuts after the September one).
The focus has now switched to Fed Chair Powell’s speech at the Jackson Hole Symposium on Friday. Traders will be eager to see if he changes his stance as well. Most likely though, he won’t pre-commit to anything and just reiterate that they will decide based on the totality of the data.
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 11 bps of easing by year-end, so another rate cut has less than 50% chance of happening.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD is approaching a major trendline around the 1.1750 level. That’s where we can expect the sellers to step in with a defined risk above the trendline to position for a drop back into the 1.1575 support. The buyers, on the other hand, will look for a break higher to increase the bullish bets into a new cycle high.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the bullish momentum into the major trendline waned recently, and we might consolidate between the trendline and the minor support zone around the 1.16 handle. From a risk management perspective, the buyers will have a better risk to reward setup around the support, while the sellers would be better off piling in around the trendline.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, there’s not much we can add here although on an intraday basis, we might see a push into the trendline if the price breaks above the recent highs at 1.1715. The red lines define the average daily range for today.
Upcoming Catalysts
This week is going to be more about Fed speakers than economic data. We begin with Fed’s Bowman tomorrow. On Wednesday, we have the Fed’s Waller and the FOMC meeting minutes. On Thursday, we get the Eurozone and US Flash PMIs as well as the US Jobless Claims figures. Finally, on Friday, we conclude the week with Fed Chair Powell speech at the Jackson Hole Symposium.
