FUNDAMENTAL
OVERVIEW
USD:
The US dollar weakened across the board in the past couple of days following
the surprisingly soft US inflation figures. The data triggered a dovish
repricing in interest rate expectations with traders scaling back significantly
the probabilities for a rate hike in July which is now comfortably off the
table.
The Fed is now expected to raise interest rates in September at the
earliest with a fully priced hike in December. The US-Iran crisis in the
background is keeping inflation risks skewed to the upside, so the downside in
the greenback should remain limited without a clear de-escalation.
EUR:
On the EUR side, the June
inflation data showed a welcome easing for the ECB which coupled with the drop
in energy prices, greatly diminished the urgency for further tightening. This
is also what policymakers have been communicating via their recent speeches
which basically sealed a pause in July.
The market is pricing in 43
bps of tightening by year-end with the next hike coming in September at the
earliest (80% probability). For now, the data supports a prolonged pause.
EURUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that EURUSDfinally reached the major downward
trendline. This is where we can expect the sellers to step in with a defined
risk above the trendline to position for a drop into the 1.10 handle. The
buyers, on the other hand, will want to see the price breaking higher to open
the door for a rally into the 1.16 level next.
EURUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we
have an upward trendline defining the correction. If we get a pullback into the
trendline, we can expect the buyers to lean on it with a defined risk below it
to keep targeting a break above the major trendline. The sellers, on the other
hand, will want to see the price breaking below the trendline and the support
to increase the bearish bets into new lows.
EURUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
On the 1 hour chart, we have a minor upward trendline defining the recent
bullish move. If we get a pullback into the trendline, we can expect the buyers
to lean on it with a defined risk below it to keep pushing into new highs. The
sellers, on the other hand, will look for a break to increase the bearish bets
into new lows. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we get the US
Retail Sales and Jobless Claims data. Tomorrow, we conclude the week with the
University of Michigan Consumer Sentiment survey. The focus will remain on
US-Iran headlines.
This article was written by Giuseppe Dellamotta at investinglive.com.