EUR/USD Daily Outlook: FOMC, yields push the pair higher
EUR/USD Daily Outlook
FUNDAMENTALS:
The euro has briefly managed to break above the all-important 1.18 mark due to the US dollar's strength ahead of the FOMC meeting minutes yesterday. However, the minutes of the June meeting came in less hawkish than markets expected as the Fed wouldn't rush into tapering. This has also calmed market fears that the Fed would move aggressively towards tapering despite an obviously uneven economic recovery in the US.
The eurozone recorded a rise in Covid infections with the new Delta variant at the beginning of Q3. This could increase market fears that countries in the euro area could delay their reopening plans and that economic recovery could be derailed. Another interesting story is that the ECB will follow the Fed in targeting an average inflation rate with occasional overshoots above the 2% level. The ECB will have a hard time convincing markets to increase their long-term inflation expectations, especially compared to the Fed, which could add to selling pressure in the euro. However, it's unlikely that this change in monetary strategy will be of great interest to the markets these days.
Latest Headlines:
USD News:
- US futures extend fall in European morning trade
- US Dollar Index eases from tops, back near 92.60
- USD to remain bid as optimism over a robust global growth is tested – MUFG
- US 10-year yields face strong support at 1.30% - UOB
- US 10-year Treasury yields bounce off five-month low amid covid concerns
- Fed's Bostic: At this point it feels the US will revert back to 2% inflation
EUR News:
- EUR/USD clinches fresh tops near 1.1830 ahead of ECB
- EUR/USD: COVID-19 concerns and ECB policy review pose downside risks – MUFG
- EUR/USD to move downward towards the 1.17 level – OCBC
- EUR/USD: Noticeably under pressure, March lows at 1.1704 in the crosshairs – Commerzbank
- Germany Current Account n.s.a. came in at €13.1B, below expectations (€16.7B) in May
- Germany Imports (MoM) above expectations (0.4%) in May: Actual (3.4%)
Upcoming Market Reports:
Here are the most important market reports for EUR/USD to follow in the coming days (all times are UTC timezone):
Thursday at 12:30: USD Unemployment Claims (Expected: 345K, Previous: 364K)
Thursday at 15:00: USD Crude Oil Inventories (Expected: -4.0M, Previous: -6.7M)
Friday at 10:00: EUR ECB President Lagarde Speaks (Expected: , Previous: )
INTERMARKET:
With the fall in the US yield curve (bull flattening), the 2-year German/US yield differentials pointed higher this morning. If risk sentiment turns somewhat positive and the US dollar starts to move in line with yields (positive correlation has already been established this morning), this could lead to further upside potential in the pair.
SENTIMENT:
Currency Strength Index:
Typical risk-off in currency strength charts. EUR and USD are somewhat range-bound (but both slightly higher today).
TECHNICALS
Buying volume entered the market after a push below 1.18, which was somewhat expected. Although still in a technical downtrend, the push above a bullish wedge pattern could lead to further strength, particularly if the USD decides to finally follow yields. The price is now trading near the 50% Fib level which aligns with a short-term resistance, with the 1.1850 (61.8% Fib level) acting as the next major hurdle for the pair.
Another important development is the falling volume along with a narrowing range in the last few candlesticks. If the price keeps rising with smaller candlestick bodies and decreasing volume, we could soon see a top.
Levels to follow (Liquidity):
Major resistance: 1.19
Minor resistance: 1.1850 (61.8% Fib)
Major support: 1.1780 (weekly low)
== SUMMARY ==
There are conflicting signals in the market, but I would rather look to trade EUR/USD from the buy-side than the sell-side.
Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
FUNDAMENTALS:
The euro has briefly managed to break above the all-important 1.18 mark due to the US dollar's strength ahead of the FOMC meeting minutes yesterday. However, the minutes of the June meeting came in less hawkish than markets expected as the Fed wouldn't rush into tapering. This has also calmed market fears that the Fed would move aggressively towards tapering despite an obviously uneven economic recovery in the US.
The eurozone recorded a rise in Covid infections with the new Delta variant at the beginning of Q3. This could increase market fears that countries in the euro area could delay their reopening plans and that economic recovery could be derailed. Another interesting story is that the ECB will follow the Fed in targeting an average inflation rate with occasional overshoots above the 2% level. The ECB will have a hard time convincing markets to increase their long-term inflation expectations, especially compared to the Fed, which could add to selling pressure in the euro. However, it's unlikely that this change in monetary strategy will be of great interest to the markets these days.
Latest Headlines:
USD News:
- US futures extend fall in European morning trade
- US Dollar Index eases from tops, back near 92.60
- USD to remain bid as optimism over a robust global growth is tested – MUFG
- US 10-year yields face strong support at 1.30% - UOB
- US 10-year Treasury yields bounce off five-month low amid covid concerns
- Fed's Bostic: At this point it feels the US will revert back to 2% inflation
EUR News:
- EUR/USD clinches fresh tops near 1.1830 ahead of ECB
- EUR/USD: COVID-19 concerns and ECB policy review pose downside risks – MUFG
- EUR/USD to move downward towards the 1.17 level – OCBC
- EUR/USD: Noticeably under pressure, March lows at 1.1704 in the crosshairs – Commerzbank
- Germany Current Account n.s.a. came in at €13.1B, below expectations (€16.7B) in May
- Germany Imports (MoM) above expectations (0.4%) in May: Actual (3.4%)
Upcoming Market Reports:
Here are the most important market reports for EUR/USD to follow in the coming days (all times are UTC timezone):
Thursday at 12:30: USD Unemployment Claims (Expected: 345K, Previous: 364K)
Thursday at 15:00: USD Crude Oil Inventories (Expected: -4.0M, Previous: -6.7M)
Friday at 10:00: EUR ECB President Lagarde Speaks (Expected: , Previous: )
INTERMARKET:
With the fall in the US yield curve (bull flattening), the 2-year German/US yield differentials pointed higher this morning. If risk sentiment turns somewhat positive and the US dollar starts to move in line with yields (positive correlation has already been established this morning), this could lead to further upside potential in the pair.
SENTIMENT:
Currency Strength Index:
Typical risk-off in currency strength charts. EUR and USD are somewhat range-bound (but both slightly higher today).
TECHNICALS
Buying volume entered the market after a push below 1.18, which was somewhat expected. Although still in a technical downtrend, the push above a bullish wedge pattern could lead to further strength, particularly if the USD decides to finally follow yields. The price is now trading near the 50% Fib level which aligns with a short-term resistance, with the 1.1850 (61.8% Fib level) acting as the next major hurdle for the pair.
Another important development is the falling volume along with a narrowing range in the last few candlesticks. If the price keeps rising with smaller candlestick bodies and decreasing volume, we could soon see a top.
Levels to follow (Liquidity):
Major resistance: 1.19
Minor resistance: 1.1850 (61.8% Fib)
Major support: 1.1780 (weekly low)
== SUMMARY ==
There are conflicting signals in the market, but I would rather look to trade EUR/USD from the buy-side than the sell-side.
Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
