USD

  • The Fed left interest rates unchanged as expected at the last meeting with basically no change to the statement. The Dot Plot still showed three rate cuts for 2024 and the economic projections were upgraded with growth and inflation higher and the unemployment rate lower.
  • The US CPI beat expectations for the third consecutive month, while the US PPI came in line with forecasts.
  • The US NFP beat expectations across the board although the average hourly earnings came in line with forecasts.
  • The US ISM Manufacturing PMI beat expectations by a big margin with the prices component continuing to increase, while the US ISM Services PMI missed with the price index dropping to the lowest level in 4 years.
  • The market now expects the first rate cut in September.

EUR

  • The ECB left interest rates unchanged as expected and opened the door for a rate cut in June.
  • The recent Eurozone CPI missed expectations.
  • The labour market remains historically tight with the unemployment rate hovering at record lows.
  • The latest Eurozone PMIs beat expectations on the Services side while the Manufacturing one missed dropping further in contraction.
  • The market expects the ECB to cut rates in June.

EURUSD Technical Analysis – Daily Timeframe

EURUSD Technical Analysis
EURUSD Daily

On the daily chart, we can see that EURUSD got rejected recently by the trendline where we had also the confluence of the 61.8% Fibonacci retracement level and the red 21 moving average. The pair sold off following another hot US CPI report and it’s now trading around the key 1.07 support zone. We can notice that this could be the neckline of a big head and shoulders pattern, so a break lower could take us to the 1.05 handle. The buyers will likely step in around the 1.07 support to position for a rally back into the 1.10 handle, while the sellers will look for a break lower to target the 1.05 handle.

EURUSD Technical Analysis – 4 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 4 hour chart, we can see that from a risk management perspective, the sellers will have a better risk to reward setup around the 38.2% Fibonacci retracement level where they will also find the confluence of the red 21 moving average and the daily 8 moving average. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.10 resistance.

EURUSD Technical Analysis – 1 hour Timeframe

EURUSD Technical Analysis
EURUSD 4 hour

On the 1 hour chart, we can see that the price has been diverging with the MACD around the key support. This is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, it should be a signal for a pullback into the base of the divergent formation around the 1.0760 level near the Fibonacci level.

Upcoming Events

Today we conclude the week with the University of Michigan Consumer Sentiment Survey.