FundamentalOverview

The USD has been under somepressure in the last couple of weeks as the weaker US data and the selloff inthe US stock market increased the expectations for more easing by year-end withthe market now fully pricing in three rate cuts.

Today we get the US CPIreport and it could be a tricky one for the US Dollar. Logically one wouldexpect more weakness for the greenback in case we get a soft report, but wemight even see a counterintuitive short-term appreciation on a relief rally in equities.

A hot report, on the otherhand, might give the greenback a boost against the major currencies on risk-offflows although even here we could see the US Dollar depreciating amid fallinglong term Treasury yields with the market expecting the Fed holding off fromcutting even in the face of more economic slowdown and eventually leading tomore aggressive cuts.

On the EUR side, the marketrecently scaled back the rate cuts expectations following the news of moredefence spending. The European yields spiked and boosted the Euro. Moreover,the ECB speakers have been coming a bit less dovish recently as they’ve beencautioning against cutting rates too fast.

EURUSD TechnicalAnalysis – Daily Timeframe

On the daily chart, we cansee that the EURUSD is testing the key swing level at 1.0933. This is where wecan expect the sellers to step in with a defined risk above the level to positionfor a pullback into the 1.0630 level. The buyers, on the other hand, will wantto see the price breaking higher to increase the bullish bets into new highs.

EURUSD TechnicalAnalysis – 4 hour Timeframe

On the 4 hour chart, we cansee that the pair is trading inside a rising channel. The buyers will likelylean on the lower bound to keep pushing into new highs, while the sellers willlook for a break lower to target the base of the channel around the 1.0765level next.

EURUSD TechnicalAnalysis – 1 hour Timeframe

On the 1 hour chart, there’snot much else we can add here as the buyers will want to lean on the bottom trendline to position for new highs, whilethe sellers will look for a break lower to target the 1.0765 level next. Todaywe have the US CPI report so from a risk management perspective, it would bebetter to wait for the release before taking new positions. The red linesdefine the average daily range for today.

UpcomingCatalysts

Today we have the US CPI report. Tomorrow,we get the US PPI data and the US Jobless Claims figures. On Friday, weconclude the week with the University of Michigan Consumer Sentimentreport.