Fundamental Analysis Technical Analysis

Key Euro Technical Analysis as Fed and ECB Monetary Policy Divergence Looms

Fundamentals To Scope

The Federal Reserve maintained interest rates at its recent meeting, with no significant modifications to the statement. The Dot Plot continues to indicate three rate cuts in 2024, and economic projections have improved, with higher growth and inflation and lower unemployment. US economic data has been mixed, with CPI and NFP surpassing expectations, while PMIs fell short, citing reduced inflationary pressures and increased layoffs. The market anticipates the first rate cut to occur in September.

Meanwhile, the European Central Bank kept interest rates steady and signaled a potential rate cut in June. The most recent Eurozone CPI data fell short of expectations, although the labor market remains tight, with unemployment at record lows. PMIs in the Eurozone exceeded expectations in the Services sector but missed in Manufacturing, which further contracted. The market expects the ECB to lower rates in June.

Technical Analysis Trade Opportunities:

On the daily chart, Euro Futures (6E) pulled back to test the 1.07 resistance zone. Sellers may enter positions here with a defined risk above the resistance, targeting new lows. Buyers, however, will look for a breakout above this level to increase bullish bets towards the trendline around 1.08.

The head and shoulders formation on the daily is not currently a threat, but support needs to hold on to the neckline in order for the bull’s momentum to remain intact. See the chart below for the support zone.

daily chart 6E with p;ossible head and shoulders

The 4-hour chart shows a potential bearish flag formation, which would be confirmed by a break below the bottom trendline. This would reinforce the resistance zone, with the top trendline adding further confluence. Sellers will target a break below the bottom trendline, while buyers will aim for an upside breakout to invalidate the bearish setup and initiate a rally towards 1.08.

4 hour chart with possible bear glaf on 6E futures


Based on the current technical analysis across multiple timeframes, 6E has a slightly bearish bias. The bearish case appears more compelling, but the potential for a bullish breakout cannot be ruled out entirely.

Bearish/Bullish Rating: Moderately Bearish (60% bearish, 40% bullish)