EURUSD Technical Analysis

Last week, central bank speakers expressed a consistent viewpoint, emphasizing the need to wait for more data before determining the extent of further tightening measures. While the majority of the FOMC expects two additional rate hikes this year, they reiterated that these decisions hinge on the incoming data. Recent indicators such as the robust housing market data, stable US Jobless Claims, and the US Services PMI exceeding expectations have inclined them towards a rate hike, making the market's expectation of a Fed increase in July seem likely if the positive data trend continues. Conversely, ECB speakers have indicated that a July hike is almost certain unless there is a significant change in the data. However, the September hike is more reliant on data, and the recent disappointing European PMI data suggests the ECB may halt its plans as early as July. Looking at the daily chart, it is evident that EURUSD recovered from its weakness in May and rallied back to the 1.10 level in June. However, it faced strong resistance there, and the downward pressure intensified with weak European PMIs, pushing the price down towards the 1.0844 level. Currently, the trend remains bullish as the moving averages are still indicating an upward direction, and the price is forming higher highs and higher lows. Nonetheless, the momentum is waning, and if Eurozone data continues to disappoint, a potential top formation could occur. Analyzing the 4-hour chart, we observe that the recent push towards the 1.10 level exhibited a divergence with the MACD, indicating a weakening momentum and often foreshadowing pullbacks or reversals. Consequently, the price broke below the previous swing low and trendline, which could be an early indication of a trend reversal. It retraced back to the red 21 moving average and the 50% Fibonacci retracement level, which is expected to attract selling pressure, potentially leading to another decline towards the 1.0779 support level.

Examining the 1-hour chart, we can observe that the price is currently trading within a rising channel, indicating a bullish trend. The buyers in the market are finding support from the red 21 moving average, suggesting potential for further upside movement. To confirm a bullish scenario, it would be significant for the price to break above the 61.8% level and the trendline. Such a move would invalidate the bearish setup and likely attract additional buying pressure.

On the other hand, more conservative sellers may opt to wait for the price to break below the lower boundary of the channel. This break would signal a potential shift in the trend and could prompt sellers to enter the market, potentially leading to an extension of the selloff towards the 1.0779 support level.

In terms of economic data, this week appears relatively light, with only the Eurozone Consumer Price Index (CPI) and US Jobless Claims scheduled for Thursday, followed by the US Personal Consumption Expenditures (PCE) report on Friday. However, despite the limited data releases, market participants can anticipate hearing from various central bank members, whose speeches and statements may provide additional insights and impact market sentiment. We shall see. Chris