EURUSD Technical Analysis – The USD remains on the backfoot

Fundamental
Overview

The USD has been generally
under pressure since the benign US CPI report last week as the hawkish
expectations subsided and the market switched its focus from inflation back to
growth. This triggered a positive risk sentiment which is generally negative
for the greenback. Yesterday, we got some US Dollar strength which peaked with
the FOMC minutes as the market faded the “old news”.

The EUR,
on the other hand, got a boost today from the Eurozone
PMIs where the data showed more positive momentum in growth with positive
signs on the inflation front. Moreover, the Eurozone
wage growth data was higher than the previous quarter, so that might keep
the ECB more wary about easing too much the policy rate after the June cut.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD pulled back from the 1.09 handle and bounced on the previous
swing high level at 1.0812. The price extended the gains today following the
Eurozone PMIs.

A break above the 1.09
handle should see the bullish momentum increasing as the buyers will likely
pile in more aggressively and target the 1.10 handle. The sellers, on the other
hand, will want to see the price breaking below the 1.0812 level to regain
control and take the pair into the 1.0727 support.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that the price yesterday fell below the trendline
and the 38.2% Fibonacci
retracement level as the hawkish FOMC minutes triggered the positive USD
reaction. Such reactions are generally caused by algos, and the market fades
them if there’s nothing new that changes the picture.

This is also a lesson to
not rely too much on the technicals because such events can lead to breakouts
which are not supported by the fundamentals.

EURUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that we have a good resistance around the 1.0860 level where
we can find the downward trendline and the upper limit of the average
daily range. The sellers will likely lean on this level to position for a
drop back into the 1.0812 level while the buyers will want to see a break to
the upside to increase the bullish bets into the 1.09 handle and beyond.

Upcoming
Catalysts

The only notable event left is the US Flash PMIs at 13:45 GMT (09:45 ET).

This article was written by Giuseppe Dellamotta at www.forexlive.com.