EURUSD Technical Analysis | Forexlive

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 US Core PCE last week came in line
with forecasts with the disinflationary progress continuing steady.
The labour market continues to show weakness as Continuing
Claims are now rising at a fast pace with the last NFP report missing across
the board and this week’s Job Openings and ADP coming below forecasts, although
the Jobless Claims were better than expected.
The ISM Manufacturing PMI last week missed
expectations falling further into contraction, while the ISM Services PMI this
week beat forecasts holding on in expansion.
The hawkish Fed members recently shifted
their stance to a more neutral position.
The market expects the Fed to start cutting rates
as soon as Q1 2024.

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 Eurozone CPI last week 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 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, but the question in 2024 will be when to cut rates.
The market expects the ECB to start cutting rates
in Q2 2024.

EURUSD Technical Analysis –
Daily Timeframe

EURUSD Daily

On the daily chart, we can see that EURUSD probed
above the key resistance around the 1.0950 level but sold off soon after from
the 1.10 handle. This drop made also the moving averages to crossover and the
price to make a new lower low. The market structure has now switched to a
bearish bias and that could also be supported from the fundamental side as
contrary to the markets’ expectations, the ECB is likely to cut before the Fed.

EURUSD Technical Analysis –
4 hour Timeframe

EURUSD 4 hour

On the 4 hour chart, we can see that we had a
strong divergence with the MACD right into the key resistance which eventually
led to the reversal. The price on this timeframe has been printing clear lower
lows and lower highs and from a risk management perspective, a pullback into
the 38.2% Fibonacci retracement level would be a better spot for new shorts for
the sellers. The target should be the next swing low around the 1.0660 level
and upon a further break lower, the key 1.05 handle.

EURUSD Technical Analysis –
1 hour Timeframe

EURUSD 1 hour

On the 1 hour chart, we can see that the
price has been diverging with the MACD for quite a while. This is generally a
sign of weakening momentum often followed by pullbacks or reversals. In this
case, given the break above the trendline, we could see a bigger pullback into
the 38.2% or 61.8% Fibonacci retracement levels.

The sellers might want to split their
positions in half as the price can react from both the levels. Alternatively,
if the bearish momentum remains strong, the sellers are likely to pile in as
soon as the price breaks below the recent low at 1.0755 to target a drop into
the 1.05 handle. The buyers, on the other hand, will likely pile in at every
break higher targeting eventually a new high.