EUR/USD stalls at a key trendline ahead of the US NFP and CPI reports. What’s next?
FUNDAMENTAL OVERVIEW
USD:
The US dollar weakened across the board this week following de-escalation in the Middle East and increased hopes for a US-Iran deal.
The bearish momentum waned though probably because the anticipated timeline for the deal passed without an announcement. Nevertheless, the hopes for a deal will likely keep the greenback on the backfoot for now unless we get another escalation.
The next major event will be the US CPI report next week. The data will be critical for the September FOMC decision and the Jackson Hole Symposium.
A hot report will likely trigger a rally in the US dollar, with traders increasing rate hike bets. A soft report, on the other hand, should reduce further the risk of Fed tightening and put more pressure on the greenback.
Today, we have the NFP report. Although the NFP is generally one of the most market-moving economic releases, the US CPI should be more important because the Fed is focused on inflation. Policymakers have been repeating that the labour market is stable and that it's not a source of inflation.
That's because wage growth has been easing steadily since 2022 and it's hovering around pre-covid levels. Therefore, I would focus more on average hourly earnings rather than the employment numbers today. It goes without saying that big deviations from the expected numbers might still trigger sizable moves.
EUR:
On the EUR side, the ECB left interest rates unchanged at the last meeting but communicated via the usual post-meeting media “leaks” that it’s ready to hike at the September meeting if the inflation outlook were to deteriorate.
The majority of policymakers that spoke after the decision stressed data-dependence and refrained from pre-committing to a policy move in September. They have also highlighted the lack of clear evidence of second-round effects and stable inflation expectations.
Nevertheless, the market pricing is favouring a rate hike with 76% chance of an increase in September. We will still get another Eurozone inflation report before the September, and oil prices could still drop further once an Iran deal is confirmed. Therefore, a rate hike is not yet a certainty.
EURUSD TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that EURUSDis consolidating as the momentum waned at the major downward trendline. This is where the sellers are likely stepping in with a defined risk above the trendline to position for a drop into the 1.13 handle. The buyers, on the other hand, continue to wait for a breakout to increase the bullish bets into the 1.18 handle next.
EURUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can see more clearly the consolidation around the trendline. The swing low around the 1.15 handle should now act as key support. If the price breaks below it, we can expect the sellers to increase the bearish bets into new lows. The buyers, on the other hand, will likely step in around the swing low with a defined risk below it to keep targeting a break above the trendline.
EURUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the price action might remain rangebound until the US CPI report, although we can expect short-term spikes today with the NFP data. We will likely need very big deviations in the NFP report to trigger more sustained moves as slight beats or misses won’t change much in the bigger picture. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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