US:
- The Fed left interest rates unchanged as expected at the last meeting.
- The macroeconomic projections were revised higher, and the Dot Plot showed that the FOMC still expects another rate hike by the end of the year with less rate cuts projected in 2024.
- Fed Chair Powell reaffirmed their data dependency but added that they will proceed carefully.
- The US CPI last week beat expectations on the headline figures, but the core measures came in line with forecasts and the market’s pricing barely changed.
- The labour market remains fairly solid as seen once again last week with the beat in Jobless Claims, although continuing claims surprisingly missed.
- The US PMIs recently showed that the US economy remains pretty resilient.
- The University of Michigan Consumer Sentiment report last Friday missed across the board with the inflation expectations figures spiking back up.
- The US Retail Sales this week beat expectations by a big margin with positive revisions to the prior figures.
- The Fed members continue to cite elevated long-term yields as a reason to proceed carefully and will likely pause in November as well.
- The market doesn’t expect the Fed to hike anymore.
EU:
- The ECB hiked by 25 bps at the last meeting and added a line in the statement that signalled the end of the tightening cycle.
- President Lagarde didn’t push back against the idea of them having reached already the terminal rate and highlighted the slowdown in Eurozone economy.
- The Eurozone CPI recently missed across the board supporting the ECB’s stance.
- The labour market remains very tight with the unemployment rate hovering at record low levels.
- Overall, the economic data lately has been showing signs of deterioration in the economy.
- Most ECB members are leaning towards keeping rates higher for longer now.
- The market doesn’t expect the ECB to hike anymore.
EURUSD Technical Analysis – Daily Timeframe
On the daily chart, we can see that the EURUSD pair rejected the key resistance around the trendline where we had also the 38.2% Fibonacci retracement level for confluence. The pair is now consolidating just above the 1.05 support but keeping a bearish bias. A break below the support should see more sellers piling in to target the 1.02 handle next. The buyers, on the other hand, will want to see the price breaking above the trendline to switch the bias from bearish to bullish and start targeting new higher highs.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently rallied back to the trendline where it got rejected again. This compression between the support and the trendline might turn into a triangle pattern and generally a breakout leads to a strong and sustained move. In this case, it might be best to wait for the price to break on either side as the price action within the triangle can be messy and erratic.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that from a risk management perspective, the sellers would be better off to short from the trendline with a defined risk above it. The buyers on the other hand, will want to go long around the support for an even better risk to reward setup. Alternatively, more conservative traders can wait for the price to break on either side before opening new positions.
Upcoming Events
Today we will get the latest US Jobless Claims data and it will be interesting to see if the miss in Continuing Claims last week was just a blip or the start of a trend. Later in the day, we will also hear from Fed Chair Powell where the market will be focused on any hint about the near-term policy outlook, especially after the strength in the economic data lately.
