The Fed members continue to repeat that they expect two more rate hikes this year if the data comes out as expected. In fact, since the last FOMC meeting, the data came all on the hawkish side and the July hike is almost certain unless we get big misses in the next NFP and CPI reports. On the other hand, the Eurozone data recently started to deteriorate notably but the ECB has already decided that a July hike is set, so the debate will centre on the September increase.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD might have formed a major head and shoulders pattern. The black neckline would probably come at the 1.07 handle and a break below it would open the door for a fall into the 1.02 handle. At the moment, the price is still supported by the moving averages being crossed to the upside, but a downside crossover would confirm the bearish bias and lead to more selling.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we might have a king’s crown pattern, which is similar to the head and shoulders pattern, but the low of the right shoulder is lower than the low of the left shoulder. This is also a signal of a change in the trend structure as the price made a new lower low.
We can also see that the price has broken below the upward trendline and then rallied to retest it at the 78.6% Fibonacci retracement level, before falling again. This is a really good bearish setup overall, so if it fails, it will show that the bullish momentum is very strong, and we should see more upside going forward.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is pulling back into a resistance zone between 1.0920 and 1.0935. This is where the sellers should pile in with a defined risk above the zone and target the neckline at the 1.07 handle. The buyers, on the other hand, will need to break above this resistance to get some more conviction and target a break above the 1.1033 high.
Today we have the US Jobless Claims report and good data should lead to more bids in the USD as Fed Chair Powell mentioned that they may deliver two or more rate hikes at consecutive meetings if the data remains strong. Weak figures, on the other hand, should pressure the USD a bit, but can also give it a boost due to a flight to safety as the market may fear a recession. Tomorrow, we conclude the week with the Eurozone CPI figures and the US PCE. A miss in the EZ CPI should lead to more downside for the EURUSD pair, while a beat may keep it at these levels.
