EURUSD Technical Analysis

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The Federal Reserve decided
to maintain interest rates at 5.00-5.25% last week. This choice was motivated
by their desire to gather additional economic data before determining whether
another hike is appropriate. Their aim is to strike the right balance of
monetary restraint that can effectively lower inflation to the target level,
while minimizing adverse effects on the economy.

In contrast, the European
Central Bank (ECB) followed expectations and raised interest rates by 25 basis
points. They also hinted at a potential additional increase in July. ECB speakers
have reiterated this stance and signalled the likelihood of another hike in
September if the prevailing conditions warrant such action. As a result, a
divergence in monetary policies has emerged between the Federal Reserve and the
ECB, ultimately benefiting the Euro.

EURUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that EURUSD has now
completely erased all the Dollar strength seen in May and it’s eyeing again the
1.1033 high. Last time, the pair had a hard time at this resistance, so we
will likely need strong fundamental catalyst to see a breakout. This may come
in the form of hot inflation data for the Eurozone or weak, but not too weak,
data for the US. Anyway, the price looks overstretched as depicted by the
distance from the blue 8 moving average. In such
cases, we can generally see some consolidation or a pullback into the moving
average before the next move.

EURUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that this latest
extension to the upside is diverging with the
MACD. This is
generally a sign of weakening momentum often followed by pullbacks or
reversals. In fact, from a risk management perspective, the buyers would be
better off waiting for a pullback into the 1.0950 support where we can also
find the trendline before
considering new long positions, all else being equal.

EURUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is rallying towards the 1.1033 high today. That is where we should expect
some sellers piling in with a defined risk above the level targeting a pullback
into the trendline.

Today
we have the US Jobless Claims report and tomorrow we conclude the week with the
US PMIs. Big misses should lead to more USD weakness as the market would price
out the rate hike in July, while big beats should result in Dollar strength as
the market would see the “two more rate hikes” expected by the Fed more likely.

This article was written by FL Contributors at www.forexlive.com.

Go to Forexlive

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