A fresh round of euro selling is seen today as the common currency falls sharply to pre FOMC level against the greenback. Furthermore, EUR/GBP dives through last week's low of 0.7851 and is resuming the whole fall from 0.8098. Swissy on the other hand, is being pressured along with the Euro, spiking, lower against the dollar and sterling. The greenback stabilized after post FOMC selling but remains mixed only, with some weakness seen against the pound. More volatility could be seen with some European markets on holiday today. Focus is now turning to March US PCE and ISM.
US personal spending is expected to climb 0.2% in Mar, up from prior 0.1% while income growth is expected to slow from 0.5% to 0.4%. Headline PCE is expected to slow from 3.4% yoy to 3.2% yoy. Core PCE is expected to be unchanged at 2.0% yoy. Jobless claims is expected to rebound from last week's surprise low of 342k to 460k. ISM manufacturing index is expected to remain in contractionary region, dropping slightly from 48.6 to 48.0 in Apr.
The FOMC cuts the federal funds rate by 25bps to 2.00% yesterday as widely expected. While it's true that Fed has shifted to a more neutral stance, markets are somewhat not convinced that a pause in Jun is a confirmed. That could clearly be seen in dollar's initial weakness post FOMC. Growth data, including today's ISM manufacturing and tomorrow's Non-Farm Payroll will need to provide the upside surprise to convince the dollar bulls on building positions for stronger dollar rebound.
Sterling, on the other hand, is the relatively firmer European currency. Focus will be on the UK manufacturing PMI to be released today which is expected to deteriorate from 51.3 to 50.9 in Apr.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.5545; (P) 1.5594; (R1) 1.5671; More
Outlook in EUR/USD remains unchanged as the recovery from 1.5516 was limited below mentioned 1.5664 minor resistance and weakens sharply again in early European session. While EUR/USD is losing some intraday downside momentum, bias remains mildly on the downside as long as 1.5664 minor resistance holds. As discussed before, EUR/USD should have at least made a short term top after completing a diagonal triangle that started at 1.5342 with bearish divergence condition in 4 hours MACD and RSI. Also, the diagonal triangle should also be the last advance in a five wave rally that started at 1.4309. Hence further decline is expected towards 1.5342/66 cluster support (38.2% retracement of 1.4309 to 1.6019 at 1.5366). On the upside, above 1.5664 will indicate that an intraday low is in place and bring recovery. But upside should be limited by 1.5773 resistance and bring fall resumption.
In the bigger picture, firm break of 1.5342 support, which will also have EUR/USD sustaining below 55 days EMA (now at 1.5490) too, will confirm that rise from 1.4309 has completed with bearish divergence condition in daily MACD and RSI too. In such case, deeper decline should then be seen to 1.4309 and 1.4966 support zone. However, strong rebound will suggest that price actions from 1.6019 is probably just developing into another sideway consolidation. But still, risk is on the downside before sustained break of 1.6019 high.
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