The NFP report last Friday missed expectations for the first time after 14 consecutive beats. The miss though was slight, and the other data came in better than expected, with the tick higher in average hourly earnings being the most worrisome for the Fed. In fact, the market still sees the FOMC raising rates by 25 bps at the next meeting.
Conversely, the ECB has already committed to a rate hike in July, while there is a stronger debate on what to do in September. In fact, the ECB members keep repeating that the September hike will depend on the data.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD has broken out to the upside of a descending triangle pattern and started a strong rally into the 1.1033 resistance. The major head and shoulders pattern is not yet invalidated, but we should now start considering the possibility of the price reaching the top trendline near the 1.12 handle. The moving averages avoided the crossover, so the trend remains bullish.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see more closely the descending triangle pattern and the breakout that led to the strong rally. We can also notice that the king’s crown pattern, which is similar to the head and shoulders pattern, got invalidated as the price rallied above the right shoulder. The target should be the 1.1033 high now, but we can’t exclude an extension to the top black trendline if the price breaks above the 1.1033 resistance with conviction.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we are starting to see a divergence with the MACD right when the price is approaching the 1.1033 resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we may get a pullback into the blue minor trendline where we can also find the red 21 moving average. The buyers should lean on that trendline with a defined risk below and target the top black trendline near the 1.12 handle. The sellers, on the other hand, will want to see the price breaking below the trendline to pile in and extend the fall into the 1.0940 level first and the 1.07 handle next.
Upcoming Events
The main event this week is the US CPI report tomorrow. We should see a strong USD if the data beats expectations, especially on the core numbers, as the market will price in a more hawkish Fed. On the other hand, a miss to the expectations, should weigh on the US Dollar as the market will price out the probabilities of another hike and even bring forward rate cuts expectations. We then conclude the week with the US Jobless Claims on Thursday and the University of Michigan Consumer Sentiment on Friday.
