EURO FUNDAMENTAL BACKDROP
The euro has not benefited as many expected after the European Central Bank (ECB)’s Holzmann favored a 50bps interest rate hike for the May meeting yesterday, a miss on US ISM manufacturing PMI and a beat on eurozone PMI data. This leaves the notion of inflationary concerns stemming from the OPEC+ production cut that could be muting the dovish tone of recent. Earlier this morning, positive export data from Germany (see economic calendar below) was not enough to offset the shortfall on the overall balance of trade figure for February and did little in the way of moving the EUR/USD needle.
Later today, the ECB consumer expectations survey will come into focus as well as another Fed Cook speech (likely to follow the hawkish tone from yesterday), followed by the Fed’s Mester.
US CPI report (see the Federal Reserve and repricing has now shifted so significantly that a inflation miss could really conditions are poor, exposing high beta FX currencies to downside risk while the US dollar’s safe-haven allure
EUR/USD ECONOMIC CALENDAR
ECB INTEREST RATE PROBABILITIES
Money markets clearly show a preference for a 25bps increment in May but half a basis point may be a possibility as the systemic impact of the banking crisis seems to be waring off. That being said, the primary focus for EUR/USD this week will come from US centric data which if disappoints, could see the 1.10 level back under consideration for the first time since February this year.
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
Daily EUR/USD price action shows the developing ascending triangle pattern (black) gaining traction by pushing up against triangle resistance at the 1.0900 psychological handle. This traditionally bullish continuation pattern provides ominous signs for bears and a confirmation close above 1.0900 via fundamental data could open up a run at 1.1000.
The Relative Strength Index (RSI) suggests a move up towards 1.1000 may not have the legs to push further with the RSI likely reflecting an overbought signal at that point.
Resistance levels:
- 1.1000
- 1.0900/Triangle resistance
Support levels:
- Triangle support
- 1.0800
IG CLIENT SENTIMENT DATA: BULLISH
IGCS shows retail traders are currently SHORT on EUR/USD, with 64% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment resulting in a short-term upside disposition.
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