EUR/USD TALKING POINTS & ANALYSIS
- Key U.S. data to set foundation for next week’s rate announcements.
- Lagarde speech may not move markets as some may expect.
- Technical analysis suggests possible pullback on EUR/USD.
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EURO FUNDAMENTAL BACKDROP
The euro lost some ground after yesterday’s better than expected U.S. Durable Goods Orders and GDP releases respectively. The dollar now looks to be finding its footing once more and could be interesting going into next week’s Federal Reserve interest rate decision. Today has a couple events to look out for including European Central Bank (ECB) President Christine Lagarde (see economic calendar below). The frequency of Lagarde’s speeches of late has almost diminished her impact on financial markets and the euro which leads me to believe that today’s guidance may not have a substantial impression.
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From a U.S. perspective, PCE and core PCE will be under the spotlight and I suspect that anything higher than estimates could see the greenback garner support. Michigan Consumer Sentiment rounds off the trading day with forecasts showing a marked improvement on the January read which could leave EUR/USD bears on the front foot heading into next week’s central bank studded week.
EUR/USD ECONOMIC CALENDAR
Source: DailyFX economic calendar
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily EUR/USD price action has stalled around the 1.0900 psychological handle coinciding with an overbought Relative Strength Index (RSI) read. Negative/bearish divergence is still in play and could follow through should next week’s Fed interest rate decision take a hawkish tilt. Currently the ECB’s meeting is likely to result in a 50bps increment and is largely priced into market pricing but the Fed is currently clumped into a “pivot” narrative with recessionary fears quelling anything marginally aggressive. There is a real chance that the Fed may surprise to the upside via forward guidance as opposed to shifting to a 50bps rate hike.
Resistance levels:
Support levels:
BEARISH IG CLIENT SENTIMENT
IGCS shows retail traders are currently SHORT on EUR/USD, with 61% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment; however, due to recent changes in long and short positioning, we arrive at a short-term upside disposition.
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