EUR/USD ANALYSIS
- German PPI beat struggles to keep euro afloat.
- US jobless claims and EZ consumer confidence in focus later today.
- Overbought euro could be in for downside correction.
EURO FUNDAMENTAL BACKDROP
The euro picked up some support ahead of the European session as German PPI data (see economic calendar) beat estimates that could point to continued inflationary pressures within the German economy. This falls in line with yesterday’s CPI report but the tone set out by ECB officials seems to be more dovish as economic growth concerns in the region ramp up.
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EUR/USD ECONOMIC CALENDAR (GMT +02:00)
Source: DailyFX economic calendar
With roughly two additional interest rate hikes expected (see below) between now and year end, the likelihood of a 25bps increment next week is almost certain. What markets will focus on is forward guidance post-July which could provide some clarity as to the ECB’s thinking and where to next for EUR/USD. The ECB’s Governing Council member Yannis Stournaras already stated that the eurozone may not be able to withstand further monetary policy tightening after July leaving the door open for a weaker euro should this come to fruition.
Later today, US jobless claims and EZ consumer confidence data will drive interest and add yet another notch to the overall economic picture for the respective regions.
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Macro Fundamentals
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EUROPEAN CENTRAL BANK INTEREST RATE PROBABILITIES
Source: Refinitiv
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily EUR/USD price action hovers around overbought territory as indicated by the Relative Strength Index (RSI) and with recent candlesticks including today’s early movement shows long upper wicks that could hint and impending downside to come.
Resistance levels:
- 1.1300
Support levels:
- 1.1185
- 1.1096
- 1.1000
IG CLIENT SENTIMENT DATA: MIXED
IGCS shows retail traders are currently SHORT on EUR/USD, with 75% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning we arrive at a short-term cautious bias.
Contact and followWarrenon Twitter:@WVenketas
