EURUSD Technical Analysis | Forexlive

USD

• The Fed left interest rates unchanged as expected at the last meeting with a shift in
  the statement that indicated the end of the tightening cycle.
• The Summary of Economic Projections showed a
  downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
  was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
  in 2024 compared to just two in the last projection.
• Fed Chair Powell didn’t push back against the strong dovish pricing
  and even said that they are focused on not making the mistake of holding rates
  high for too long.
• The latest US PCE missed expectations across the board with
  the Core 6-month annualised rate falling below the Fed’s target at 1.9%.
• The labour market has been softening via less job
  opportunities rather than more layoffs with the Initial Claims hovering around cycle lows and Continuing Claims
  remaining high.
• The latest ISM Manufacturing PMI missed expectations falling further into
  contraction, while the ISM Services PMI beat forecasts holding on in expansion.
• The market expects the Fed to start cutting rates
  in Q1 2024.

EUR

• The ECB left interest rates unchanged as
  expected at the last meeting maintaining the usual data dependent language.
• President Lagarde highlighted
  once again that the risks to the economy are skewed to the downside and that
  they did not discuss rate cuts, which was a pushback against the aggressive
  market’s rate cut pricing.
• The recent Eurozone CPI missed
  expectations across the board, further reaffirming that the ECB is done for the
  cycle with rate cuts likely coming soon.
• The labour market remains historically
  tight with the unemployment rate hovering at cycle lows.
• The Eurozone PMIs missed
  expectations across the board with both the Manufacturing and Services sectors
  falling further into contraction.
• The ECB members continue to repeat that they will
  keep rates high for as long as necessary and that the market’s expectations are
  too aggressive.
• The market expects the ECB to start cutting rates in
  Q2 2024.

EURUSD Technical Analysis –
Daily Timeframe

On the
daily chart, we can see that EURUSD has extended the pullback into the 1.09
region with the price approaching a key support zone around the 1.09 handle. In
fact, we can see that we have the confluence with the
trendline and the
61.8% Fibonacci retracement level,
so we can expect at least a bounce. The buyers will likely lean on the
trendline to position for a rally into new highs while the sellers will want to
see the price breaking lower to increase the bearish bets into the lows.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the latest leg
higher diverged with the
MACD which is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the target for the pullback should be right around the
support zone
highlighted by the blue box where we can also find the confluence with the 1.09
handle and the recent swing low level.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
sellers will have another opportunity to short the pair before the 1.09 handle.
In fact, we can see that we have a nice resistance zone around the 1.10 handle
where there’s the confluence with the downward trendline and the 38.2%
Fibonacci retracement level. That’s where we can expect the sellers to step in
with a defined risk above the trendline to target the 1.09 handle first and a
break lower next. The buyers, on the other hand, will want to see the price
breaking higher to pile in and position for a rally into new highs.

Upcoming Events

This week is full of key economic data which will
culminate with the NFP report on Friday. We begin today with the US ISM
Manufacturing PMI and Job Openings and given the recent trends there could be
room for disappointment. Later in the day, we will get the release of the FOMC
Minutes, but it’s not expected to be market-moving given that it’s three weeks
old data. Tomorrow, we will have another slate of US labour market data with
the release of the US ADP and Jobless Claims figures. Finally, on Friday, we
conclude the week with the Eurozone CPI, the NFP report and the ISM Services
PMI.