EURUSD Weekly Analysis & Forecast
Diupdate
Hi Traders!
As we showed in our last analysis (see chart below), the pair had formed a Reversal Pattern on both daily chart and intraday chart confirming the bullish trend in play.
That said, from a technical point of view we also have a bullish harmonic structure on weekly chart with a potential Target around 1.1065. If our analysis is correct, we should wait for some pullbacks before trying to take a long position, but we will talk about that during Monday's session.
PREVIOUS ANALYSIS
KEY FUNDAMENTALS POINTS
The Federal Reserve held its benchmark overnight interest rate steady in the 5.25%-5.50% range at the conclusion of its July 30-31 policy meeting, but also signaled that rate cuts may begin as soon as the U.S. central bank's meeting in September. The decision will hinge on data between now and then. U.S. firms added an underwhelming 114,000 jobs in July, and revisions to the prior two months knocked 29,000 positions from the previously estimated number of payroll jobs. That pushed the three-month average total payroll growth down to 170,000, below the level typical before the COVID-19 pandemic. The unemployment rate also rose to 4.3%, which could heighten fears that the labor market is deteriorating and potentially making the economy vulnerable to a recession.
The number of people in a job or looking for work grew. Government data in late July showed the slowing of the labor market is being driven by low hiring, rather than layoffs, with hires dropping to a four-year low in June. Average hourly wages rose 3.6% in July compared to a year ago, versus a 3.8% annual increase in June. The Fed generally considers wage growth in the range of 3.0%-3.5% as consistent with its 2% inflation target.
In a sign of the job market's continued resilience, the level of job openings remained above 8 million in June, while the number of open jobs available for each unemployed person fell slightly to 1.2, remaining roughly where it was in the years before the pandemic.
Fed Chair Jerome Powell has kept a close eye on the U.S. Labor Department's Job Openings and Labor Turnover Survey (JOLTS) for information on the imbalance between labor supply and demand, and the pandemic-era jump to more than 2 to 1 in the number of open jobs for each available worker was emblematic of the time.
Things have cooled substantially. Other aspects of the survey, like the quits rate, now down to 2.1, have edged back to pre-pandemic levels in what Fed officials view as an emerging balance between the supply and demand for workers. While the hiring rate has slowed, for example, the layoff rate has remained stable in a sign of companies holding on to workers.
The personal consumption expenditures price index, used by the Fed to set its 2% inflation target, shows inflation slowly subsiding. It fell in June to a 2.5% annual rate, from 2.6% in the prior month. Core PCE prices, stripped of volatile food and energy costs, remained unchanged in June at 2.6%. Despite that reading, the data looks set to help Fed officials build more confidence that inflation is moving toward the U.S. central bank's 2% target.
On a month-to-month basis, the PCE index rose 0.1% while core PCE prices edged up 0.2%. Officials have begun to pay closer attention to signs of weakening demand in the economy as a precursor to a slowed pace of price increases.
The separate consumer price index fell in June by 0.1%, with drops in both volatile energy items and core consumer goods like vehicles, and weakness in housing costs that Fed officials have long been waiting to see. The 0.2% rise in shelter prices was the slowest since August of 2021, and overall it was the weakest CPI print since May of 2020.
The data pushed the annual rise in consumer prices down to 3% from 3.3% in the prior month, with the more volatile core index, excluding food and energy, falling to 3.3% from 3.4%.
Thanks for watching
As we showed in our last analysis (see chart below), the pair had formed a Reversal Pattern on both daily chart and intraday chart confirming the bullish trend in play.
That said, from a technical point of view we also have a bullish harmonic structure on weekly chart with a potential Target around 1.1065. If our analysis is correct, we should wait for some pullbacks before trying to take a long position, but we will talk about that during Monday's session.
PREVIOUS ANALYSIS
KEY FUNDAMENTALS POINTS
The Federal Reserve held its benchmark overnight interest rate steady in the 5.25%-5.50% range at the conclusion of its July 30-31 policy meeting, but also signaled that rate cuts may begin as soon as the U.S. central bank's meeting in September. The decision will hinge on data between now and then. U.S. firms added an underwhelming 114,000 jobs in July, and revisions to the prior two months knocked 29,000 positions from the previously estimated number of payroll jobs. That pushed the three-month average total payroll growth down to 170,000, below the level typical before the COVID-19 pandemic. The unemployment rate also rose to 4.3%, which could heighten fears that the labor market is deteriorating and potentially making the economy vulnerable to a recession.
The number of people in a job or looking for work grew. Government data in late July showed the slowing of the labor market is being driven by low hiring, rather than layoffs, with hires dropping to a four-year low in June. Average hourly wages rose 3.6% in July compared to a year ago, versus a 3.8% annual increase in June. The Fed generally considers wage growth in the range of 3.0%-3.5% as consistent with its 2% inflation target.
In a sign of the job market's continued resilience, the level of job openings remained above 8 million in June, while the number of open jobs available for each unemployed person fell slightly to 1.2, remaining roughly where it was in the years before the pandemic.
Fed Chair Jerome Powell has kept a close eye on the U.S. Labor Department's Job Openings and Labor Turnover Survey (JOLTS) for information on the imbalance between labor supply and demand, and the pandemic-era jump to more than 2 to 1 in the number of open jobs for each available worker was emblematic of the time.
Things have cooled substantially. Other aspects of the survey, like the quits rate, now down to 2.1, have edged back to pre-pandemic levels in what Fed officials view as an emerging balance between the supply and demand for workers. While the hiring rate has slowed, for example, the layoff rate has remained stable in a sign of companies holding on to workers.
The personal consumption expenditures price index, used by the Fed to set its 2% inflation target, shows inflation slowly subsiding. It fell in June to a 2.5% annual rate, from 2.6% in the prior month. Core PCE prices, stripped of volatile food and energy costs, remained unchanged in June at 2.6%. Despite that reading, the data looks set to help Fed officials build more confidence that inflation is moving toward the U.S. central bank's 2% target.
On a month-to-month basis, the PCE index rose 0.1% while core PCE prices edged up 0.2%. Officials have begun to pay closer attention to signs of weakening demand in the economy as a precursor to a slowed pace of price increases.
The separate consumer price index fell in June by 0.1%, with drops in both volatile energy items and core consumer goods like vehicles, and weakness in housing costs that Fed officials have long been waiting to see. The 0.2% rise in shelter prices was the slowest since August of 2021, and overall it was the weakest CPI print since May of 2020.
The data pushed the annual rise in consumer prices down to 3% from 3.3% in the prior month, with the more volatile core index, excluding food and energy, falling to 3.3% from 3.4%.
Thanks for watching
Catatan
DAILY ANALYSISEuro found new momentum after dollar tumbled following dire nonfarm payrolls data. July jobs arrived well below expectations.
The EURUSD shot sharply higher Friday and remained well-bid Monday morning after traders emptied their pockets of dollars and flocked to alternative forex players. The European currency added a solid 1.3% gain to log its best trading session since November. The euro-dollar exchange rate crossed $1.09 to a Friday session high of $1.0926, erasing losses accumulated over the past couple of weeks. Monday deals kicked it up to $1.0970.
Jobs data, weak and disappointing jobs data, shook the US dollar out of its dominance. The nonfarm payrolls for July — new jobs added to the economy — arrived at 114,000, badly undershooting estimates of 174,000 new hires. The data fanned worries about a flailing US economy, which is sitting on interest rates at a 23-year high, making it relatively difficult for the labor market to sustain an upward trajectory.
To this end, markets now eye a heavier cut of 50 basis points to interest rates, up from 25 basis points, when the Federal Reserve meets in September. Lower rates generally weigh on the local currency as they translate to lower yields. Investors tend to shun low-yielding currencies in favor of assets that carry a higher probability of returns, albeit they can be riskier.
From a technical point of view, the pair started the first weekly session with a pullback by correctly reaching the support area before triggering a new Top. That said, we are currently approaching an interesting resistance area on daily chart and this will be our next "Key Moment(um)"
Catatan
🔴 resistance area:
Catatan
There are a couple of expiries to take note of. They are for EUR/USD at the 1.0925 and 1.1035 levels. They former lies near the 200-hour moving average, so there is some technical significance there. However, price action today is largely going to be dictated by the reaction to the US CPI report. As such, EUR/USD might be more paralyzed until we get to that. As for upside levels, the 1.1000 mark is a key one to watch and the expiries at 1.1035 could limit any spike higher later in the day. That before rolling off and also depending on the extent of how soft the inflation numbers are, that is if it were to be the case.Catatan
Daily Target hit:
Catatan
"There are a couple of expiries to take note of..." 😘Trading ditutup: target tercapai
Weekly Target 1 hit:
Trading ditutup: target tercapai
Target 2 hit:
The dollar traded near the lowest in more than a year against the euro and sterling on Thursday as a dovish Federal Reserve and fresh signs of weakness in the U.S. job market backed the case for interest rate cuts. The dollar sagged below the closely watched 145 yen mark as U.S. Treasury yields US10Y slid, ahead of weekly jobless claims data later in the day and a hotly anticipated speech by Fed Chair Jerome Powell at the central bank's annual Jackson Hole symposium on Friday. The dollar index DXY, which measures the currency against the euro, sterling, yen and three other major peers, was little changed at 101.14 as of 0015 GMT. It dipped to 100.92 overnight for the first time this year. The euro EURUSD was flat at $1.1154 after pushing as high as $1.1130 on Wednesday for the first time since July of last year.
Fed officials last month were strongly leaning toward an interest rate cut at their September policy meeting and several of them would have even been willing to reduce borrowing costs immediately, according to the minutes of the July 30-31 gathering released on Wednesday. Meanwhile, employers added far fewer jobs than originally reported in the year through March, according to a Labor Department report released the same day. Traders now price in a 38% probability of a 50 basis point (bp) cut at the Fed's Sept. 17-18 meeting - up from 33% a day earlier - and a 62% chance of a 25 bp reduction, according to the CME Group's FedWatch Tool. Powell gives the keynote speech in Jackson Hole on Friday, and markets are hungry for any hints on the likely size of a cut next month, and whether borrowing costs are likely to be lowered at each subsequent policy meeting. "We favour a 25 bp cut because the U.S. economy is still in good shape - 50 bp cuts are usually reserved for situations where the economic outlook is under threat," said Kristina Clifton, a senior economist and currency strategist at Commonwealth Bank of Australia.
From a technical point of view, our bullish harmonic structure has been completed correctly reaching Target at 1.1170.
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