Takeaway

The presenter argues that the Euro Dollar's recovery is constructive but now faces critical resistance at 1.1656. A breach of this level is needed to extend the rally, with upcoming US CPI and ECB rate decision data likely to be the main catalysts. The bullish outlook would be invalidated by a break below key support at 1.1564.

What the presenter said

• The Euro Dollar is poised for a third consecutive monthly advance. [00:13]
• It rebounded this summer off key support at 1.1355, a 38.2% retracement of the advance off last year's low. [00:16]
• On the weekly chart, the pair has rallied six out of the past seven weeks and moved back above its 52-week moving average. [00:46, 00:54]
• The daily chart shows the pair holding a tight ascending channel off the late July low. [01:25]
• Initial resistance is at 1.1656 (the 61.8% retracement of the most recent drop), and a break above is needed for the next leg higher. [01:58, 02:10]
• Initial support is at the monthly open around 1.1617. [02:24]
• Key support is the 1.1565-1.1578 zone. [02:33]
• The bullish view is invalidated by a break below 1.1564, which would suggest a more significant high is in place. [03:07]
• Event risk includes the ECB decision (25 bps hike expected) and US PPI/CPI data this week. [03:19, 03:38]
• The market is pricing a 62% chance of a Fed rate hike next week, and a hot CPI print could solidify this and boost the dollar. [03:52, 04:11]

Trade ideas

No actionable trade was put forward. The presenter's market view is bullish on the Euro Dollar provided it holds above the key 1.1565-1.1578 support zone. A breach of resistance at 1.1656 is required to confirm upside continuation toward targets of 1.1703 and 1.1745.

Levels and data cited

Price Levels (Euro Dollar): * 1.1745: Target (Objective yearly open) * 1.1703: Target * 1.1656: Resistance (61.8% retracement of recent drop) * 1.1617: Support (September monthly open) * 1.1565-1.1578: Support (38.2% retracement, May low, January low) * 1.1564: Invalidation Level (Bullish invalidation) * 1.1355: Support (38.2% retracement of entire advance from last year's low)

Data Cited: * CME Group FedWatch Tool: 62% chance of a Fed rate hike as of Sep 10. * ECB Rate Decision: 25 bps hike expected on Sep 10. * United States PPI: Data release on Sep 10. * United States CPI: Data release on Sep 11. * United States NFP: Cited as showing "resilient labor markets" last week.

Risks and what would invalidate this

• A break below 1.1564 would invalidate the bullish outlook and suggest a more significant high is in place.
• Hotter than expected US inflation data (PPI and CPI) could increase Fed rate hike odds and strengthen the dollar, hindering the Euro's recovery.
• The guidance from the ECB accompanying its rate decision may be more impactful than the widely expected 25 bps hike.