Whereas each the ECB and the Fed will probably be elevating rates of interest within the latter half of the yr, latest headlines recommend that the case for continued progress within the US financial system is stronger than in Europe
Final week, we famous that that the world’s most widely-traded foreign money pair was rising inside a near-term bullish channel and trying to retest key resistance within the 1.0770 space. Because the up to date chart under reveals, EUR/USD did certainly retest that space, however bulls had been unable to muster sufficient power to push the pair above it.
Supply: StoneX, TradingView
Now, EUR/USD has definitively damaged down from that channel and is inside about 20 pips of previous-resistance-turned-support within the 1.0640 zone. The concept that former resistance ranges, or ceilings on worth, can flip into future help ranges, or flooring below worth, as soon as they’re damaged (and vice versa) known as the polarity precept, and on this case it means that a break again under the 1.0640 degree would shift the near-term bias to bearish for a transfer again down towards 1.0500. Certainly, the pair’s 4-hour RSI indicator has already dropped to its lowest degree in additional than two weeks, signaling that purchasing stress is quickly dissipating.
From a elementary perspective, the quick catalyst for in the present day’s selloff in EUR/USD is better-than-expected financial information out of the US, the place each this morning’s ISM Manufacturing PMI report and the JOLTS job openings report got here in sturdy. In the meantime, the European Union’s resolution to ban most Russian oil imports by the top of the yr, whereas principled, might have the short-term impact of slowing financial progress and additional entrenching inflation.
In different phrases, whereas each the ECB and the Fed will probably be elevating rates of interest within the latter half of the yr, latest headlines recommend that the case for continued progress within the US financial system is stronger than in Europe, and that might maintain the dollar on the entrance foot within the coming days.