USD
- The Fed left interest rates unchanged as expected at the last meeting with a shift in the statement that indicated the end of the tightening cycle.
- The Summary of Economic Projections showed a downward revision to Growth and Core PCE in 2024 while the Unemployment Rate was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts in 2024 compared to just two in the last projection.
- Fed Chair Powell didn't push back against the strong dovish pricing and even said that they are focused on not making the mistake of holding rates high for too long.
- The latest US CPI slightly beat expectations but analysts expect the Core PCE to print at 0.2% M/M again following the CPI data.
- The US PPI missed expectations across the board supporting the disinflationary impulse.
- The labour market continues to soften although Initial Claims keep on hovering around cycle lows while Continuing Claims are ranging at a higher level.
- The latest ISM Manufacturing PMI beat expectations, while the ISM Services PMI missed by a big margin.
- The hawkish Fed members have been leaning on a more neutral side lately.
- The market expects the Fed to start cutting rates in March.
EUR
- The ECB left interest rates unchanged as expected at the last meeting maintaining the usual data dependent language.
- President Lagarde highlighted once again that the risks to the economy are skewed to the downside and that they did not discuss rate cuts, which was a pushback against the aggressive market’s rate cut pricing.
- The recent Eurozone CPI missed expectations with the disinflationary process remaining intact.
- The labour market remains historically tight with the unemployment rate hovering at cycle lows.
- The Eurozone PMIs missed expectations across the board with both the Manufacturing and Services sectors falling further into contraction.
- The ECB members recently have been pushing back against the aggressive rate cuts expectations.
- The market expects the ECB to start cutting rates in April.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD is breaking the key trendline that has been defining the uptrend since last October. This is opening the door for a bigger correction into the 1.07 handle, but the price will need to break below the 1.09 handle to confirm it. The sellers should already be piling in with a defined risk above the trendline, while the buyers will try to defend the 1.09 support before folding quickly if the price were to continue lower.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been ranging between the 1.09 support and the 1.10 resistance. This is giving us some clear setups:
- The buyers will want to go long on the support to target the resistance and eventually a breakout.
- The sellers will want to see the price breaking lower to increase the bearish bets into the 1.07 handle.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the current price action and we can notice that we have a strong resistance zone around the 1.0930 level where we can find the confluence with a downward trendline, the Fibonacci retracement levels and the red 21 moving average. If we were to get a pullback, this is where the sellers will likely step in with a defined risk above the trendline to target a break below the 1.09 support. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for a rally into the 1.10 resistance.
Upcoming Events
Today, all eyes will be on Fed's Waller as the market will be eager to see if he decides to pushback against the aggressive rate cuts expectations. Tomorrow, we will get the US Retail Sales report while on Thursday we will see the latest US Jobless Claims figures. Finally, on Friday, we conclude the week with the University of Michigan Consumer Sentiment survey.
