Basic overview
The US dollar was sold off across the board on Wednesday following the release of a weak US CPI report. This data has prompted the market to re-price the discounts twice this year. Later in the day, we got a tougher than expected decision from the FOMC as the chart showed that the Fed sees only one cut for the year despite a weak US CPI report.
This gave the dollar a boost although Fed Chair Powell backed away from the forecast making it a bit less worrisome as the central bank is still very data dependent. Furthermore, the US dollar found further support yesterday as the market entered risk-off mode for unclear reasons.
On the other hand, the Euro was hit hard by the European elections as political uncertainty weighed on sentiment and led to an increase in risk premiums on bonds and a sell-off in European stocks.
Technical analysis of EURUSD – daily time frame
On the daily chart, we can see that EURUSD broke the key support area at 1.0727 today and the bearish momentum increased as sellers piled in more aggressively. The target should be around the 1.06 handle. A break below the 1.06 handle would open the door for a drop to the key 1.05 level which is essentially the bottom of the range since late 2022.
Technical analysis of EURUSD – 4-hour time frame
On the 4-hour chart, we can more clearly see the support being broken where we also had the 61.8% Fibonacci retracement level to meet. From a risk management perspective, late sellers may want to wait for a pullback to the 1.08 support-turned-resistance level to take a position that allows the downtrend to continue to the 1.06 handle with a better risk-reward price setup.
On the other hand, buyers will want to see the price rise back above the 1.08 resistance level to gain more control and start targeting the 1.09 level next.
Technical analysis of EUR/USD – 1 hour time frame
On the hourly chart, we can see that the pair is approaching the lower level of the average daily range. This is where we may see a bounce as the price generally does not extend beyond levels without a strong catalyst.
Upcoming stimuli
Today we conclude the week with the University of Michigan Consumer Confidence Survey where data is expected to show an increase to 72.0 versus 69.1 previously.
