EUR/USD TALKING POINTS
- Completely different situations for subsequent week’s ECB charge determination.
- Parity nonetheless in danger as elementary headwinds develop.
EURO FUNDAMENTAL BACKDROP
The euro has been testing parity a number of occasions this week however has but to convincingly break beneath at this level. This units up subsequent week’s key danger occasion fairly properly with the ECB charge announcement scheduled on Thursday (see calendar beneath). Coinciding with the rate of interest determination comes the anticipated resumption of Russian fuel flows by the Nord Stream 1 pipeline on the identical day and with political uncertainty at play, there isn’t any assure that fuel flows will resume.
The ECB has pre-announced a 25bps charge hike (which might not be the wisest selection) whereas cash market worth in 30-35bps as of now. That factors to the potential for a hawkish shock nevertheless the present Italian political backdrop will weigh negatively on this end result (widening BTP/Bund spreads). Key factors to think about for the assembly will embrace extra steerage round anti-fragmentation together with a weakening euro which is heightening the inflationary influence on the buyer.
EUR/USD ECONOMIC CALENDAR
Supply: DailyFX financial calendar
EUR/USD DAILY CHART
Chart ready by Warren Venketas, IG
Price motion on the each day EUR/USD chart above highlights the lack of euro bears to convincingly pierce beneath the 1.0000 psychological help zone however present fundamentals do level to this being a matter of when not how. The December 2002 swing low would come into consideration ought to this happen at 0.9854 however a 50bps charge hike and Nord Stream 1 coming again on-line might invalidate this transfer and see EUR/USD give attention to the 1.0210 resistance degree.
IG CLIENT SENTIMENT DATA: BULLISH
IGCS reveals retail merchants are at present LONG on EUR/USD, with 72% of merchants at present holding lengthy positions (as of this writing). At DailyFX we sometimes take a contrarian view to crowd sentiment nevertheless as a result of latest adjustments in lengthy and brief positioning we arrive at a short-term upside bias.
Contact and observe Warren on Twitter: @WVenketas