The miss in the US CPI report caused a big selloff
in the US Dollar across the board as the market’s expectations leant on the
less hawkish side. The US data though kept on surprising to the upside with the
US Retail Sales Control Group beating
expectations by a big margin and the US Initial Claims falling
back to record lows. Yesterday, the US PMIs painted
a mixed picture with Services PMI finally easing but the Manufacturing PMI
surprising with a big jump from 46.2 to 49.0. We are likely to see the Fed
doing more if the data keeps on remaining this strong.
The ECB is expected to hike by 25 bps bringing the
deposit rate to 3.75% this week. The central bank should stress the data
dependency for the September meeting but it’s unlikely to pre-commit to
anything at this meeting. The Eurozone PMIs keep on
falling pretty fast as the deterioration in the economy becomes clearer going
into the second half of the year.
EURUSD Technical Analysis –
Daily Timeframe
EURUSD Daily
On the daily chart, we can see that the break above
the upper trendline might
have been just a fakeout, and if that’s the case, it opens the door for a
massive fall into the lower trendline near the 1.08 handle. Before that, the
buyers will have a strong support zone at
the 1.1033 level where we can also find the 50% Fibonacci retracement level
and the red 21 moving average for confluence. This is
where they should pile in with a defined risk below the area and target another
high. The sellers, on the other hand, will want to see the price breaking below
the support to increase the selling pressure and target the lower trendline.
EURUSD Technical Analysis –
4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can see the support zone
highlighted with a blue box. The short-term trend is clearly downwards as the
price is printing lower lows and lower highs while the moving averages are
crossed to the downside. A break above the downward minor trendline should give
the buyers another confirmation of a change in momentum and likely lead to the
start of another uptrend.
EURUSD Technical Analysis –
1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can see that we
have a divergence with
the MACD right
when we are approaching the key support zone. This is generally a sign of
weakening momentum often followed by pullbacks or reversals. In this case, the
resistance to watch is the one at 1.1110 where we should find the sellers
leaning on it to position for the resumption of the downtrend. The buyers will
need the price to break above that resistance to confirm the bounce and the
possible start of another uptrend.
Upcoming Events
Today the only notable
event will be the US Consumer Confidence report, but it’s usually not a market
mover unless there is a big surprise. Tomorrow, the Fed is expected to hike by
25 bps and the market will be attentive to any hint about the future
intentions. On Thursday, we will have the ECB rate decision where the central
bank is expected to hike by 25 bps and stress their data dependency for the
next moves. Later that day we will see another US Jobless Claims where strong
data should support the US Dollar while weak readings should weaken it. Finally,
on Friday, we will have the latest US PCE and ECI reports with the market
likely to be more focused on the wages data where a big beat may give the USD
some strength.