Analyzing the Technicals of EUR/USD: A Forexlive Perspective

USD

• The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement.
• Fed Chair Powell stressed once again that they are proceeding carefully as the full effects of policy tightening have yet to be felt.
• The recent US CPI missed expectations across the board bringing the expectations for rate cuts forward.
• The labor market is starting to show weakness as Continuing Claims are now rising at a fast pace and the recent NFP report missed across the board. Last week though, the US Jobless Claims beat forecasts by a big margin, although volatility in the data is normal.
• The latest US PMIs came basically in line with expectations with a miss in the Manufacturing index and a beat in the Services measure.
• The recent Fedspeak has been leaning on the hawkish side, but the recent data suggest that the Fed is likely done for the cycle.
• The market doesn’t expect the Fed to hike anymore.

EUR

• The ECB left interest rates unchanged as expected at the last meeting 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 recent Eurozone CPI missed expectations on the headline figures but the Core measure remained unchanged. This is unlikely to change the ECB’s stance anyway.
• The labor market remains historically tight but the unemployment rate recently ticked higher.
• The recent Eurozone PMIs slightly beat expectations on both the Manufacturing and Services measures although the indexes remain in contraction.
• The ECB members continue to repeat that they will keep rates high for as long as necessary to bring inflation back to their 2% target.
• The market doesn’t expect the ECB to hike anymore.

EURUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that EURUSD reached the key resistance around the 1.0950 level where we can also find the 61.8% Fibonacci retracement level for confluence. This is where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to continue targeting new highs.

EURUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have a divergence with the MACD right at the key resistance. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it might be another confirmation for the sellers that we could see at least a pullback. The buyers should lean on the lower bound of the channel to position for a break above the resistance, while the sellers will look for a break lower to increase the bearish bets into new lows.

EURUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have another trendline where more aggressive buyers might be leaning onto to position for another extension to the upside, although the risk to reward would be worse. The sellers, on the other hand, will want to see the price breaking below the trendline to get an extra confirmation for a move lower.

Upcoming Events

Today, we will get the latest US Consumer Confidence report and it will be interesting to see how the US consumers see the labor market. On Thursday, we will have many key economic releases with the Eurozone CPI and Unemployment Rate in the morning and the US PCE and US Jobless Claims in the afternoon. Finally, on Friday, we conclude the week with the US ISM Manufacturing PMI which missed expectations by a big margin the last time.

See the video below