Analyzing the EURUSD: Technical Insights on Forexlive

EURUSD Fundamental Analysis

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 Core PCE last week came in line with expectations, so the market’s pricing barely changed.
• The labour market remains pretty resilient but we are starting to see some weakness as Continuing Claims missed expectations once again last week pointing to an upward trend.
• The US Retail Sales recently beat expectations by a big margin with positive revisions to the prior figures, suggesting the consumers’ spending remains solid.
• The recent US PMIs showed that the economy now looks more balanced.
• Fed Chair Powell and 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 this week.
• The market doesn’t expect the Fed to hike anymore.

EU

• The ECB left interest rates unchanged as expected as the central bank has ended its tightening cycle.
• President Lagarde highlighted the weakness in the Eurozone economy and reaffirmed that rates will make a substantial contribution to curbing inflation.
• The Eurozone CPI today missed expectations on the headline figures but the Core measure remained unchanged. This won’t change the ECB’s stance anyway.
• The labour market remains very tight with the unemployment rate hovering at record low levels.
• The recent Eurozone PMIs 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 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 bounced around the key 1.05 support and avoided a breakout of the bear flag. This might have been also a “break and retest” pattern following the breakout of the major downward trendline, so the buyers might have more conviction to target new highs. The moving averages are now crossed to the upside and the price continues to print higher highs and higher lows. These are early bullish signs.

EURUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the price broke through the resistance zone around the 1.0620 level with the buyers now eyeing the upper bound of the channel. That’s where we can expect the sellers to step in again with a defined risk above the trendline to position for another drop into the lower bound of the channel and aiming for a breakout. The buyers, on the other hand, will want to see the price breaking above the upper bound of the channel to extend the rally into the 1.08 handle.

EURUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we had a divergence with the MACD right when the price was approaching the lower bound of the flag pattern, the broken downward trendline and the key 1.05 support zone. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got a reversal, and the odds are now in favour of a rally into the upper bound of the channel.

From a risk management perspective, the buyers would be better off to lean on the resistance turned support around the 1.0620 level where we can also find the confluence with the trendline, the red 21 moving average and the Fibonacci retracement levels. If the price breaks below the trendline, the bullish setup would be invalidated, and the sellers will pile in to target a breakout of the bear flag.

Upcoming Events

This week, we will get lots of tier one data points with the US labour market and the FOMC decision in focus. Today, we have the US Employment Cost Index and the Consumer Confidence report. Tomorrow, it will be the time for the US ADP, the ISM Manufacturing PMI, the Job Openings data and the FOMC rate decision. On Thursday we will get the US Jobless Claims data, while on Friday we conclude the week with the Eurozone Unemployment Rate, the US NFP report and the ISM Services PMI.