The recent news article discusses the monetary policies of the US Federal Reserve (Fed) and the European Central Bank (ECB). The Fed has decided to keep interest rates unchanged, citing the strong resilience of the US economy. However, they also anticipate another rate hike by the end of the year. Fed Chair Powell emphasized the importance of data dependency and expressed caution in finding the optimal level of rates. Meanwhile, the ECB recently hiked rates by 25 basis points but hinted at the end of the tightening cycle due to the slowdown in the Eurozone economy. Inflation measures in the Eurozone remain uncomfortably high, and there are signs of economic deterioration, raising concerns about a possible recession in the near future. Unlike the Fed, the market does not expect the ECB to raise rates further.
In terms of technical analysis, the article examines the EUR/USD currency pair. On the daily chart, the pair has reached the 1.05 handle, which was the initial target of a significant selloff. This oversold condition may lead to a bounce, but a stronger rally would require weak US data or strong Eurozone readings. On the 4-hour chart, there is a confluence of the 38.2% Fibonacci retracement level and the 1.07 resistance level, indicating strong resistance if the price reaches that point. Currently, the sellers are in control, but the buyers may start accumulating around the 1.05 handle for a potential rally. On the 1-hour chart, a bearish setup is observed with the sellers likely to pile in around the minor trendline, aiming for a break below the 1.05 handle. Conversely, the buyers may enter around the same level, expecting a correction towards the major trendline.
Upcoming events include the US Jobless Claims report, which could impact the strength of the US dollar, and the Eurozone CPI, which may trigger a response from the ECB. Additionally, the US PCE data will be released, providing further insights into the state of the US economy.