USD
- The Fed left interest rates unchanged as expected while dropping the tightening bias in the statement but adding a slight pushback against a March rate cut.
- Fed Chair Powell stressed that they want to see more evidence of inflation falling back to target and that a rate cut in March is not their base case.
- The latest US GDP beat expectations by a big margin.
- The US PCE came mostly in line with expectations with the Core 3-month and 6-month annualised rates falling below the Fed’s 2% target.
- The US NFP report beat expectations across the board by a big margin.
- The ISM Manufacturing PMI surprised to the upside with the new orders index, which is considered a leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat expectations across the board with the employment sub-index erasing the prior drop and prices paid jumping above 60.
- The US Consumer Confidence report came in line with expectations but the labour market details improved considerably.
- The market now expects the first rate cut in May.
EUR
- The ECB left interest rates unchanged as expected maintaining the usual data dependent language.
- The recent Eurozone CPI came in line with expectations with the disinflationary process continuing steady.
- The labour market remains historically tight with the unemployment rate hovering at record lows.
- The Eurozone PMIs beat expectations on the Manufacturing side but missed on the Services one with both measures remaining in contraction.
- The ECB members recently have been pushing back against the aggressive rate cuts expectations.
- The market expects the ECB to cut rates in April.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD eventually reached the key support zone around the 1.0723 level where we had also the 61.8% Fibonacci retracement level for confluence. This is where the buyers stepped in with a defined risk below the level to position for a rally into new highs. The sellers, on the other hand, will now want to see the price breaking lower to increase the bearish bets and target the 1.05 handle.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the pair has been trading inside a falling wedge with the buyers leaning on the bottom trendline while the sellers kept on piling in around the top trendline. The breakout to the downside suggests the sellers are now in control. From a risk management perspective, the best level for new shorts would be around the broken lower bound of the wedge where we can also find the confluence with the 38.2% Fibonacci retracement level and the red 21 moving average. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and increase the bullish bets into new highs.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bounce on the key support level with the price now eyeing the resistance zone around the 1.0780 level. We can also notice that the last leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it should be another confirmation for a pullback into the resistance zone.
Upcoming Events
This week is basically empty on the data front with just a couple of key economic releases. Today we have the Eurozone Retail Sales while on Thursday, we will see the latest US Jobless Claims figures.
