USD
- The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
- Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
- The US Core PCE last week came in line with forecasts with the disinflationary progress continuing steady.
- The labour market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board.
- The ISM Manufacturing PMI last week missed expectations falling further into contraction.
- The recent US Consumer Confidence report beat expectations although the details about the labour market continued to weaken.
- The hawkish Fed members recently shifted their stance to a more neutral position.
- The market expects the Fed to start cutting rates as soon as Q1 2024.
EUR
- The ECB left interest rates unchanged as expected at the last meeting as the central bank has ended its tightening cycle.
- President Lagarde highlighted the weakness in the Eurozone economy and reaffirmed that rates will make a substantial contribution to curbing inflation.
- The Eurozone CPI last week missed expectations across the board further reaffirming that the ECB is done for the cycle with rate cuts likely coming soon.
- The labour market remains historically tight with the unemployment rate hovering at cycle lows.
- The recent Eurozone PMIs slightly beat expectations on both the Manufacturing and Services measures although the indexes remain in contraction.
- The ECB members continue to repeat that they will keep rates high for as long as necessary to bring inflation back to their 2% target.
- The market expects the ECB to start cutting rates in Q2 2024.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD probed above the key resistance around the 1.0950 but sold off after touching the 1.10 handle. We got a nice pullback as the price bounced around the 1.08 handle where we can also find the red 21 moving average for confluence. This is where the buyers might start to pile in to position for another rally into new highs, while the sellers are likely to continue to increase the bearish bets at every break lower.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we had a strong divergence with the MACD right into the key resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. The target is generally the base of the divergent formation, which in this case comes right around the 38.2% Fibonacci retracement level. This is where the buyers should step in with a defined risk below the level to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the next swing low at 1.0650.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have another divergence with the MACD right at the 38.2% Fibonacci retracement level. This is another bullish confluence for the buyers as it signals that the bearish momentum is weakening and we might reverse from here. More conservative buyers might want to wait for a break above the minor trendline before entering the market, while the sellers should lean on the trendline to position for a break below the recent low.
Upcoming Events
This week we will see lots of US labour market data culminating with the NFP release on Friday. Today, we have the ISM Services PMI and the US Job Openings reports. Tomorrow, we will get the US ADP data. On Thursday, it will be the time for the US Jobless Claims figures, while on Friday we conclude the week with the NFP report.
