The miss in the US CPI report last week triggered a heave US Dollar selling across the board. The market started to price out the more hawkish expectations and sees the July hike as the last one for this cycle. Moreover, the resilient labour market and the rising consumer sentiment point to a soft-landing scenario where inflation comes down to target without affecting too much economic growth. This has led to a positive risk sentiment and the USD weakened.
The ECB has already committed to a rate hike in July, so even if the data disappoints going forward, it’s more likely to affect the September decision rather than the July one. In fact, the ECB members keep repeating that the September hike is more uncertain, and it will depend on the data.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD has been rallying strongly for over a week now with almost no pullbacks. The price has even broken out of the upper bound of the rising wedge pattern, which is generally a sign that the momentum is so strong that it’s more likely that the price will continue in that direction even after a pullback. The price is also overstretched now as depicted by the distance from the blue 8 moving average. Generally, we can see some consolidation or a pullback into the moving average before another major move.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that after breaking out of the descending triangle pattern, the price just kept on rallying with shallow pullbacks into the blue 8 moving average. This is a sign of strong momentum and the recent consolidation at the highs indicates that this momentum is weakening. We may see some more consolidation or a pullback from here.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that EURUSD has been in a tight range since last Friday. The buyers may lean already against the blue trendline with a defined risk below it and target new higher highs. The sellers, on the other hand, can only wait for the price to fall below the upper bound of the rising wedge to confirm a fakeout and pile in to extend an eventual selloff into the lower bound of the wedge.
Upcoming Events
Today we have the US Retail Sales on the agenda, followed by US Jobless Claims on Thursday. Given the current sentiment, good data should be just an opportunity to buy the dip while bad data should increase the US Dollar selling. It’s likely that only very ugly figures can spook the market and lead to a broad USD buying as a safe haven.
