EUR Under Pressure
EURUSD fell sharply on Friday in response to the latest UoM consumer data. Consumer inflation expectations were seen soaring to 12-year highs of 3.2% last month. The rise comes despite CPI heading lower and reflects the view that consumers now believe inflation will remain entrenched around higher levels. Against this backdrop, traders are losing some conviction in the view that the Fed will cut rates later this year.
Fed Pushes Back Against Rate Cut Calls
Indeed, recent Fed commentary has seen various members pushing back against this view also. Fed’s Jefferson cited concerns over stickiness in core inflation while Fed’s Bowman was seen arguing that the Fed would need to see more evidence of inflation falling sustainably before it could support a rate cut. Looking ahead today, Fed’s Kashkari will also speak and is widely expected to reiterate recent comments in favour of keeping US rates higher for longer against a backdrop of still-high inflation.
The rise in USD has weighed sharply on EUR in particular. With EUR longs extended ahead of the recent ECB meeting, the single currency was vulnerable to an order book clear-out. With this in mind, the current correction might push deeper before the bull trend resumes.
Technical Views
EURUSD
The reversal from around the 1.1126 highs has seen EURUSD head lower within the bull channel which has framed the recovery off last year’s lows. Price is now sitting just above the channel lows and the 1.0785 level. While this area holds, the focus remains on a further move higher. For bears, a break of the channel will be needed to negate this bias. Notably, there is a bullish signal in today’s Signal Centre for EURUSD at 1.0827 targeting 1.0950.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.