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.
