EURUSD Technical Analysis – Key Levels in Play

WE:

• The Fed left interest rates unchanged as expected.
• Macroeconomic projections have been revised upwards as the economy has shown much stronger resilience than expected and the Dot Plot showed that the majority of members still expect another rate hike by end of the year with fewer rate cuts in 2024.
• Fed Chairman Powell reiterated its reliance on data, but added that it would proceed cautiously in its attempt to find the optimal level of rates. Powell also added that a soft landing is not the base case scenario at the moment, although that is what they are aiming for.
• Last week’s US CPI came in line with expectations, so market prices remained about the same.
• The job market has shown signs of slowing, although it remains relatively strong.
• The market essentially believes there is a 50/50 chance of a hike in November.

EU:

• The ECB raised its monetary policy by 25 basis points at its last meeting and added a line in its statement hinting at the end of the tightening cycle.
• President Lagarde did not reject the idea that they had already reached the terminal rate and highlighted the slowdown in the euro zone economy.
• Inflation measures have eased a bit recently, but remain uncomfortably high.
• The labor market remains very tight, with the unemployment rate hovering at historically low levels.
• Overall, economic data has recently shown signs of rapid deterioration in the economy, pointing to a possible recession in the near future.
• The market no longer expects the ECB to raise rates.

EURUSD Technical Analysis – Daily Timeline

On the daily chart, we can see that EURUSD sold off towards the 1.0635 support again after the FOMC meeting. There are strong buyers on this medium as we continue to see strong refusals. In fact, we can expect buyers to accumulate with defined risk below the level to target the downtrend line and possibly a breakout. Sellers, on the other hand, will want to see price break through support with conviction to position themselves for a selloff into the 1.05 handle.

EURUSD Technical Analysis – 4 hour time frame

On the 4-hour chart we can see that we have a divergence with the MACD, which is usually a sign of weakening momentum, often followed by pullbacks or reversals. In this case, we could see a pullback into the downtrend line where we also have the 38.2% Fibonacci retracement level for the confluence. Sellers are likely to rely on the trendline with risk set above to target a break below support. Buyers will need the price to cross the trendline and the 1.0770 level to change the market structure from bearish to bullish.

EURUSD Technical Analysis – 1 Hour Timeframe

On the hourly chart we can see that we have minor resistance around the 1.0670 level as we have the confluence with the red 21 moving average, previous support turned resistance and the 38.2% Fibonacci retracement level. This is where we can expect some sellers to start pouring in with defined risk above resistance. If price breaks through this resistance, then buyers will target the trendline with more conviction.

Events to come

The week is coming to a close, but we still have a few key economic releases to come. The main event today will be the US jobless claims report as labor market data remains very important to the Fed and the market. Tomorrow we will see the latest PMI data from the Eurozone and the United States, which should move the market.