Fundamental Overview
The USD continues to be supported against most major currencies, especially the commodity currencies, as the markets remain in a risk-off mood following some bad US data releases. In fact, since last Friday, we got weak US Flash Services PMI, UMich final Consumer Sentiment and yesterday a weak US Consumer Confidence report.
The problem is that we’ve also got inflation expectations jumping to new highs in both the UMich and the Conference Board report. The market might be fearing that in case we get a slowdown, the Fed might not be fast enough in cutting rates amid inflation remaining above target and uncomfortably high long-term inflation expectations.
This is something to keep in mind in light of the next NFP and CPI reports coming out before the March FOMC decision where we will also get the updated SEP and Dot Plot.
On the EUR side, the ECB speakers have been coming a bit less dovish recently as they’ve been cautioning against cutting rates too fast. Last week, we got the Eurozone PMIs which showed steady growth with another pick up in the manufacturing index, which is more sensitive to the business cycles. The market is expecting another 25 bps cut at the upcoming meeting with a total of 81 bps of easing by year-end.
EURUSD Technical Analysis – Daily Timeframe
EURUSD Daily
On the daily chart, we can see that the EURUSD is trading near the 1.0532 resistance. The sellers will likely step in around these levels with a defined risk above the resistance to position for a drop into the 1.02 handle. The buyers, on the other hand, will look for a break higher to increase the bullish bets into new highs.
EURUSD Technical Analysis – 4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can see that we have an upward trendline defining the bullish momentum. If we get a pullback into the trendline, we can expect the buyers to lean on it with a defined risk below it to position for a rally into the 1.06 handle. The sellers, on the other hand, will look for a break lower to increase the bearish bets into new lows.
EURUSD Technical Analysis – 1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, there’s not much else we can add here as the buyers will want to lean on the trendline to position for new highs or wait for a break above the resistance, while the sellers will look for a break below the trendline to increase the bearish bets into the 1.02 handle next. The red lines define the average daily range for today.
Upcoming Catalysts
Tomorrow we get the latest US Jobless Claims figures, while on Friday we conclude the week with the France CPI, the German CPI and the US PCE data.