Fxequity

EUR/USD Unphased by Optimistic EU Sentiment Knowledge, Bearish Euro


EU ANALYSIS

  • Optimistic EU shopper confidence and sentiment knowledge.
  • Divergence between Fed and ECB.
  • Consideration turns to inflation knowledge.
  • Breakout to be confirmed on EUR/USD.

EURO AREA FUNDAMENTAL BACKDROP

EU ECONOMIC AND INDUSTRIAL SENTIMENT BEATS ESTIMATES WHILE CONSUMER CONFIDENCE COMES IN AS EXPECTED

As anticipated, the Eurozone shopper confidence and sentiment indicators got here in largely in line or above forecasts after yesterday’s German and French statements cleared the path.

eu consumer confidence and sentiment

Supply: DailyFX economic calendar

ECB HOLDS FIRM TO LOWER FOR LONGER

This week noticed meteoric rises in U.S. Treasury yields inflicting a broad primarily based sell-off in fairness markets all over the world. The Germany 40 (DAX) was one such sufferer however has since recovered some misplaced good points as we speak. The spillover was observed in European authorities bonds as effectively however to a lesser extent as ECB President Christine Lagarde reiterated the transitory inflation outlook for the Eurozone – in distinction to the Federal Reserve who introduced a extra hawkish stance as tapering is more likely to begin later this yr.

The greenback is buying and selling considerably larger this morning on the again of upper yields with the EUR/USD pair breaking under key help ranges.

UPCOMING EUROZONE AND U.S. INFLATION IN FOCUS THIS WEEK

With inflation all the trend in the mean time and the ECB dismissing present elevated ranges, one other print larger than expectations (see financial calendar under) might put extra stress on the ECB to change its viewpoint. A precursor to Eurozone inflation figures will come tomorrow through the German (EU’s most influential economic system) announcement. U.S. inflation will even be intently watched with the Fed’s most well-liked metric of inflation (Core PCE) is scheduled for Friday and PMI’s to shut off the week.

EUROZONE CPI:

Eurozone CPI

Supply: Refinitiv

EUR/USD ECONOMIC CALENDAR:

EUR/USD economic calendar

Supply: DailyFX economic calendar

TECHNICAL ANALYSIS

EUR/USD DAILY CHART

EUR/USD daily chart

Chart ready by Warren Venketas, IG

The rectangle pattern talked about in last week’s analysis has been breached this morning as prior helpat 1.1680 (23.6% Fibonacci level) failed to carry off EUR/USD bears.

The Relative Strength Index (RSI) is but to increase into oversold territory which suggests there could also be extra room for added draw back. The November 2020 swing low will function the subsequent degree of help at 1.1602. Excessive influence financial knowledge this week will give additional directional bias to the pair however it’s arduous to disregard the robust downtrend short-term.

A pullback throughout the rectangle (blue) and every day candle shut above 1.1680 will doubtless lead to a continuation of the sample with sentiment shifting to the upside.

Resistance ranges:

Assist ranges:

  • 1.1602 – November 2020 swing low

IG CLIENT SENTIMENT DATA PROMOTES NEAR-TERM DOWNSIDE

IGCS reveals retail merchants are presently distinctly brief on EUR/USD, with 65% of merchants presently holding lengthy positions (as of this writing). At DailyFX we sometimes take a contrarian view to crowd sentiment and the actual fact merchants are net-long is suggestive of a bearish inclination.

— Written by Warren Venketas for DailyFX.com

Contact and observe Warren on Twitter: @WVenketas





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