Overall, the data wasn’t as bad as one
might think by just looking at the reaction but given that we were positioned
for a strong report and the pricing got more hawkish after the Fed’s decision,
the weaker data was enough to trigger a quick repricing.
In fact, the market is now
pricing 59 bps of easing by year-end compared to just 35 bps before the NFP
release. That’s a pretty quick change of heart. The NFP
clearly made them a bit more worried, and a September cut is now basically a
done deal.
It’s highly likely that
more benign data will see Fed Chair Powell opening the door for a cut in
September at the Jackson Hole Symposium.
On the EUR side, we haven’t
got anything new in terms of fundamentals after the US-EU trade deal that set
tariffs at 15%. Many ECB members are now taking a much more neutral approach to
rate cuts. They will need significant negative data to force them to cut
further. The market is pricing just 14 bps of easing by year-end, so another
rate cut has basically a 50% chance of happening. This is
where the sellers are stepping in with a defined risk above the level to position
for a drop into the 1.1065 level next. The buyers, on the other hand, will want
to see the price breaking higher to increase the bullish bets into a new cycle
high.
EURUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, there’s
not much we add here as the sellers will continue to lean on the resistance to
keep pushing into new lows, while the buyers will look for a break higher to
increase the bullish bets into new highs.
EURUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that we have a minor support zone around the
1.15-ish handle. If the price gets there, we can expect the buyers to step in
with a defined risk below the zone to position for a break above the 1.1575
resistance. The sellers, on the other hand, will look for a break lower to
increase the bearish bets into new lows
