December 20, 2024 at 09:24AM
Fundamental
Overview
The USD got a boost from
the FOMC decision as the market perceived it as more
hawkish than expected. Overall, apart from some slight tweaks, the Fed matched
the market’s pricing. Nonetheless, the market reacted in a big way pushing
Treasury yields higher and giving the USD a tailwind.
The data is what really
matters now as it will decide what the Fed is going to do. They switched their
focus on inflation again, so it will likely take just one soft CPI report in
January to see the market reacting in a dovish way sending Treasury yields and
the US Dollar lower.
On the EUR side, the ECB cut interest rates by 25 bps as expected
recently. The central bank removed the line saying it will keep policy rates
sufficiently restrictive for as long as necessary. The market is pricing a 95%
chance for the ECB to cut by 25 bps in January and deliver a total of 113 bps
of easing by the end of 2025.
EURUSD Technical
Analysis – Daily Timeframe
On the daily chart, we can
see that EURUSD broke out of the range between the 1.0450 support
and 1.0610 resistance following the FOMC decision. The price is now consolidating
near the 2024 low at 1.0335. This is where the buyers are stepping in with a
defined risk below the level to position for a pullback into the major trendline.
The sellers, on the other hand, will want to see the price breaking lower to
increase the bearish bets into new lows.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see more clearly the spike lower on the FOMC decision and the consolidation
near the 2024 low. From a risk management perspective, the sellers will have a
better risk to reward around the support
now turned resistance at 1.0450. The buyers, on the other hand, will want
to see the price breaking higher to increase the bullish bets into the
trendline.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a pullback into the
1.0450 level, while the sellers will look for a break below the 2024 low. The
red lines define the average daily range for today.
Upcoming
Catalysts
Today, we conclude the week with the US PCE data.
This article was written by Giuseppe Dellamotta at www.forexlive.com.