Fundamental
Overview
We continue to see a
pullback in the US Dollar as the market kind of reached the peak in the
repricing of interest rates expectations and it will need stronger reasons to
price out the remaining rate cuts for 2025.
This was signalled by the
lack of US Dollar strength after lots of strong US data with the market’s
pricing remaining largely unchanged around three rate cuts by the end of 2025.
We might see the greenback remaining on the backfoot at least until the US CPI
due in two weeks.
On the EUR side, the
probabilities for a 50 bps cut in December rose to 63% from 26% last Friday due
to the weak Eurozone PMIs. That might have been an overreaction as the market
pared back those expectations this week.
Today, we get the Eurozone
CPI report. The focus will be on the Core measures and the services inflation
rate as that has been stuck at 4% for a year.
A downside surprise in the
Core CPI measures might get us to the ECB decision with basically a 50/50
chance, but the central bank will likely cut by 25 bps anyway. An upside
surprise, on the other hand, should give the EUR a boost with the economy
likely picking up next year and the aggressive rate cuts expectations being
scaled back.
EURUSD Technical
Analysis – Daily Timeframe
EURUSD Daily
On the daily chart, we can
see that EURUSD erased all the losses from the Eurozone PMIs and it’s now
trading near the 1.06 handle. From a risk management perspective, the sellers
will have a better risk to reward setup around the trendline
where they will also find the 61.8% Fibonacci
retracement level for confluence.
The buyers, on the other hand, will want to see a break higher to increase the
bullish bets into the 1.09 handle next.
EURUSD Technical
Analysis – 4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can
see that we had a quick push higher this morning into the 1.06 handle that
eventually got erased as the sellers stepped in around that key swing level.
The buyers will want to see the price breaking higher to increase the bullish
bets into the trendline, while the sellers will keep on defending the level to
position for a drop into new lows.
EURUSD Technical
Analysis – 1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can
see that we have minor upward trendline defining the current bullish momentum.
The buyers will likely keep on leaning on the trendline to position for new
highs, while the sellers will look for a break lower to increase the bearish
bets into new lows. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have Eurozone CPI report with the Core CPI Y/Y expected at 2.8% vs.
2.7% prior.