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 recent US CPI 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 pretty resilient as seen once again last week with the beat inJobless Claims, although continuing claims missed for a second time in a row.
- The US Retail Sales last week beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending is still solid.
- The US PMIs this week showed that the economy now looks more balanced and resilient.
- Fed Chair Powelland other FOMC members continue to highlight the rise in long term yields as doing the job for the Fed and therefore they are expected to keep rates steady 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 highlighted the slowdown in Eurozone economy and didn’t push back against the idea of them having reached already the terminal rate.
- The Eurozone CPI recently missed expectations across the board supporting the ECB’s stance.
- The labour market remains very tight with the unemployment rate hovering at record low levels.
- The Eurozone PMIs this week missed across the board as the economy continues to struggle.
- Overall, the economic data has been showing signs of fast deterioration, which gives the ECB a good reason to keep rates steady.
- The 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 rallied into the upper bound of the bear flag before getting rejected and selling off into the lower bound of the pattern. The price is now breaking out of the flag which raises the chances of seeing the pair falling back to the 1.02 handle.
EURUSD Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the sellers stepped in around the upper bound of the flag to position for a fall into the lower bound and increased the bearish bets as the price broke below the support zone around the 1.0620 level. It’s going to be a hard job for the buyers, but we can expect them to step in around the key 1.0520 support where we can find the broken downward trendline for confluence in what could end up being a “break and retest” pattern.
EURUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a divergence with the MACD into the key 1.0520 support which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, from a risk management perspective, the sellers would have a better risk to reward setup leaning on the resistance around the 1.0562 level where we can find the confluence with the red 21 moving average.
Upcoming Events
Todaywe will have the ECB monetary policy decision where the central bank is expected to keep rates unchanged, while later in the day we will see the latest US Jobless Claims data with the market likely focusing on the Continuing Claims figures as they’ve missed expectations two times in a row already and might be a signal that the labour market is weakening. Tomorrow, we will get the US PCE report which is unlikely to change anything for the Fed at this point in time.
