EURUSD Technical Analysis – Watch out for the breakout of the bear flag

<p>US</p><ul><li>The Fed <a href="https://www.forexlive.com/centralbank/the-fomc-keeps-the-target-fed-funds-range-at-525-to-550-20230920/">left interest rates unchanged</a> as expected at the last meeting.</li><li>The macroeconomic projections were revised higher,
and the Dot Plot showed that the FOMC still expects another rate hike by the
end of the year with less rate cuts projected in 2024.</li><li><a href="https://www.forexlive.com/centralbank/highlights-from-the-fed-chair-powells-press-conference-after-september-rate-decision-20230920/">Fed Chair Powell</a> reaffirmed their data dependency but added that
they will proceed carefully. </li><li>The recent <a href="https://www.forexlive.com/news/us-september-cpi-37-yy-versus-36-yy-expected-20231012/">US CPI</a> beat expectations on the headline
figures, but the core measures came in line with forecasts and the market’s
pricing barely changed. </li><li>The <a href="https://www.forexlive.com/news/us-august-non-farm-payrolls-187k-vs-170k-expected-20230901/">labour market</a> remains pretty resilient as seen once again last
week with the beat in<a href="https://www.forexlive.com/news/us-weekly-initial-jobs-claims-198k-versus-212k-expected-20231019/">Jobless Claims</a>, although continuing claims missed for a second
time in a row. </li><li>The <a href="https://www.forexlive.com/news/us-september-retail-sales-07-versus-03-expected-20231017/">US Retail Sales</a> last week beat expectations by a big
margin with positive revisions to the prior figures, suggesting the consumers’
spending is still solid.</li><li>The <a href="https://www.forexlive.com/news/us-september-sp-global-flash-services-pmi-509-vs-498-expected-20231024/">US PMIs</a> this week showed that the economy now
looks more balanced and resilient.</li><li><a href="https://www.forexlive.com/centralbank/feds-powell-fomc-is-proceeding-carefully-20231019/">Fed Chair Powell</a>and other FOMC members continue to highlight the rise in long term yields as doing
the job for the Fed and therefore they are expected to keep rates steady in
November as well.</li><li>The market doesn’t expect the Fed to hike anymore.</li></ul><p>EU</p><ul><li>The ECB <a href="https://www.forexlive.com/centralbank/ecb-raises-key-rates-by-25-bps-in-september-monetary-policy-meeting-20230914/">hiked by 25 bps</a> at the
last meeting and added a line in the statement that signalled the end of the
tightening cycle.</li><li>President Lagarde highlighted the slowdown in
Eurozone economy and didn’t push back against the idea of them having reached
already the terminal rate.</li><li>The <a href="https://www.forexlive.com/news/eurozone-september-preliminary-cpi-43-vs-45-yy-expected-20230929/">Eurozone CPI</a> recently
missed expectations across the board supporting the ECB’s stance.</li><li>The <a href="https://www.forexlive.com/news/eurozone-august-unemployment-rate-64-vs-64-expected-20231002/">labour market</a> remains
very tight with the unemployment rate hovering at record low levels.</li><li>The <a href="https://www.forexlive.com/news/eurozone-october-flash-services-pmi-478-vs-487-expected-20231024/">Eurozone PMIs</a> this
week missed across the board as the economy continues to struggle. </li><li>Overall, the economic data has been showing signs
of fast deterioration, which gives the ECB a good reason to keep rates steady.</li><li>The ECB members are leaning towards keeping rates
higher for longer now.</li><li>The market doesn’t expect the ECB to hike anymore.</li></ul><p>EURUSD Technical Analysis –
Daily Timeframe</p><p>On the daily chart, we can see that the EURUSD pair
rallied into the upper bound of the <a href="https://www.forexlive.com/Education/chart-patterns-guide-20220125/">bear flag</a> before
getting rejected and selling off into the lower bound of the pattern. The price
is now breaking out of the flag which raises the chances of seeing the pair
falling back to the 1.02 handle. </p><p>EURUSD Technical Analysis –
4 hour Timeframe</p><p>On the 4 hour chart, we can see that the sellers
stepped in around the upper bound of the flag to position for a fall into the
lower bound and increased the bearish bets as the price broke below the <a href="https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/">support</a> zone
around the 1.0620 level. It’s going to be a hard job for the buyers, but we can
expect them to step in around the key 1.0520 support where we can find the
broken downward <a href="https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/">trendline</a> for <a href="https://www.forexlive.com/Education/technical-analysis-confluence-20220318/">confluence</a> in what
could end up being a “break and retest” pattern. </p><p>EURUSD Technical Analysis –
1 hour Timeframe</p><p>On the 1 hour chart, we can see that we
have a <a href="https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/">divergence</a> with
the <a href="https://www.forexlive.com/Education/technical-analysis-understanding-macd-20220427/">MACD</a> into
the key 1.0520 support which is generally a sign of weakening momentum often
followed by pullbacks or reversals. In this case, from a risk management
perspective, the sellers would have a better risk to reward setup leaning on
the resistance around the 1.0562 level where we can find the confluence with
the red 21 moving average. </p><p>Upcoming Events</p><p><a href="https://www.forexlive.com/EconomicCalendar">Today</a>we will have the ECB monetary policy decision
where the central bank is expected to keep rates unchanged, while later in the
day we will see the latest US Jobless Claims data with the market likely
focusing on the Continuing Claims figures as they’ve missed expectations two
times in a row already and might be a signal that the labour market is
weakening. Tomorrow, we will get the US PCE report which is unlikely to change
anything for the Fed at this point in time. </p>

This article was written by FL Contributors at www.forexlive.com.