Fundamental
Overview
The US Dollar continues to
consolidate around the highs although it’s stronger against the commodity
currencies. In the bigger picture, the market reached the peak in the repricing
of interest rates expectations, and it will need stronger reasons to price out
the remaining rate cuts for 2025.
In fact, despite lots of
strong US data, the market’s pricing remaining largely unchanged around three
rate cuts by the end of 2025. The focus is now on the US CPI report. It looks like the Fed really wants to cut next week before pausing
for some months. So, we might need an upside surprise in the core inflation
numbers to force them to change plans.
Even if the Fed decides to
cut next week despite a hot CPI, the market will likely scale back further the
rate cuts expectations for 2025 and that could trigger some risk aversion with
the US Dollar rallying across the board. The best scenario would be a soft
report given the overstretched long positions in the greenback. In such a case,
we can expect the US Dollar to selloff across the board.
On the EUR side, tomorrow the
ECB is expected to cut interest rates by 25 bps bringing the policy rate to
3.00%. The market’s pricing has been very aggressive lately due to a series of
weaker than expected economic releases, but the majority of ECB’s officials
pushed back against a 50 bps cut in December. After this week’s cut, the market
sees five more in 2025 which could turn out to be too much if things pick up
next year.
EURUSD Technical
Analysis – Daily Timeframe
EURUSD Daily
On the daily chart, we can
see that EURUSD continues to consolidate between the 1.06 resistance
and the 1.05 support. From a risk management perspective, the sellers will have
a better risk to reward setup around the trendline to position for a drop into new
lows. The buyers, on the other hand, will want to see a break higher to
increase the bullish bets into the 1.09 handle next.
EURUSD Technical
Analysis – 4 hour Timeframe
EURUSD 4 hour
On the 4 hour chart, we can
see more clearly the rangebound price action that’s been going on for a few
weeks as the market reached the peak in the repricing of rate cuts for the Fed.
We have an interesting zone around the 1.0550 level that’s been acting as kind
of a barometer with the price above it being more bullish and below it being
more bearish. Overall though, we continue to trade in a range and the US CPI
report today should finally get us out of it.
EURUSD Technical Analysis – 1 hour Timeframe
EURUSD 1 hour
On the 1 hour chart, we can
see that we have a downward trendline defining the current bearish momentum.
The sellers will likely continue to lean on it to position for new lows, while
the buyers will look for a break higher to target the major trendline. The red
lines define the average daily range for today.
Upcoming
Catalysts
Today we get the US CPI report. Tomorrow, we have the ECB rate decision, the
US Jobless Claims and the US PPI.