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 US CPI beat expectations for the second consecutive month with the disinflationary trend reversing.
- The US PPI beat expectations across the board by a big margin.
- The US Initial Claims beat expectations while Continuing Claims missed. Overall, the data remains steady.
- 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 Retail Sales missed expectations across the board by a big margin.
- The market now expects the first rate cut in June.
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 placing more weight on wage growth and data dependency.
- The market expects the ECB to cut rates in April.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that EURUSD bounced from the key support around the 1.07 handle and rallied all the way back to the red 21 moving average. This is where we can expect the sellers to step in as they also have the trendline for confluence. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and start targeting the 1.10 handle.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a strong resistance zone around the 1.08 handle where we can find the confluence with the trendline, the previous swing high level, the 50% Fibonacci retracement level and the daily 21 moving average. Moreover, we can see that at the moment, we have an upward trendline defining the current short-term uptrend. The buyers are likely to lean on the trendline and the 21 moving average to position for a breakout of the major trendline with a better risk to reward setup. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the latest leg higher diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be another bearish confluence for the sellers. The buyers will need the price to break decisively above the 1.08 resistance zone to invalidate the bearish setup turn the trend around.
Upcoming Events
This week is basically empty on the data front with just the release of the FOMC Meeting Minutes tomorrow followed by the Eurozone and the US PMIs, and the US Jobless Claims on Thursday.
See the video below
