News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Gold
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here:https://t.co/7kPzAoNoLG https://t.co/5lbyBJeeA7
  • Entry orders are a valuable tool in forex trading. Traders can strategize to come up with a great trading plan, but if they can’t execute that plan effectively, all their hard work might as well be thrown out. Learn how to place entry orders here: https://t.co/lAFyv1gM0P https://t.co/ubLimoYAcr
  • What is the outlook for financial markets ahead of the first presidential debate and how are Democratic nominee Joe Biden and President Donald Trump doing in the polls? Find out from @ZabelinDimitri here:https://t.co/QQwAZTxZFg https://t.co/4cRhRCiv3C
  • The US Dollar could gain as it forms bullish technical formations against the Singapore Dollar and Malaysian Ringgit. USD/PHP may have bottomed, will USD/IDR rise next? Find out from @ddubrovskyFX here:https://t.co/3UIKmbLIvD https://t.co/PY2YyH4vkQ
  • The Indian Rupee may be at risk to the US Dollar as USD/INR attempts to refocus to the upside. This is as the Nifty 50, India’s benchmark stock index, could fall further. Get your $USDINR market update from @ddubrovskyFX here:https://t.co/3wsYlSxd26 https://t.co/z2qB9p8IgX
  • A proxy of #EmergingMarket capital flows hit its lowest since July, falling with the #SP500 after some divergence This is as #USD gained against its developing FX counterparts, highlighting potential risk of a spillover outwards Stay tuned for next week's #ASEAN fundy outlook! https://t.co/kAvpnb0EXO
  • 4 consecutive down weeks for the #SP500, last matched over a year ago #Fed balance sheet continues to gain very cautiously, now at its highest since the middle of June. Still, at slower pace than last week Focus shifts to US fiscal stimulus next week in the House of Reps https://t.co/f8zpSILm86
  • #Gold prices have broken lower and while the broader technical structure is constructive, the risk remains for a deeper correction before resumption. Get your $XAUUSD technical analysis from @MBForex here: https://t.co/7p3jPx6nQd https://t.co/nnCSdt6OV5
  • Forex Update: As of 20:00, these are your best and worst performers based on the London trading schedule: 🇬🇧GBP: 0.00% 🇳🇿NZD: -0.02% 🇯🇵JPY: -0.15% 🇨🇭CHF: -0.23% 🇦🇺AUD: -0.25% 🇪🇺EUR: -0.33% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/O8Qb7OHZza
  • Commodities Update: As of 20:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: -0.30% Gold: -0.33% Silver: -0.92% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/lEALo4Z1M9
Euro Has to Get by July Inflation, Q2 Euro-Zone GDP if Rally is to Continue

Euro Has to Get by July Inflation, Q2 Euro-Zone GDP if Rally is to Continue

2017-07-30 22:00:00
Christopher Vecchio, CFA, Senior Strategist
Share:
Euro Has to Get by July Inflation, Q2 Euro-Zone GDP if Rally is to Continue

Fundamental Forecast for EUR/USD: Neutral

- Incoming July inflation data to show that price pressures barely over half of the ECB’s target; the stronger the Euro gets, the more of an issue it becomes for inflation.

- In the futures market, net-long Euro positions remain near their largest level since May 2011 – right when EUR/USD peaked just below 1.5000.

- Review our Q3’17 EUR/USD forecast as we finish the month of July.

The Euro was by no means the best performer last week, but it didn’t lag that far behind: the worst performing EUR-cross in the last full week of July was EUR/GBP, which closed lower by a mere -0.31%. With the Federal Reserve’s policy statement on Wednesday being interpreted as dovish by market participants, risk appetite was well-supported and nearly all major currencies were able to rally versus the US Dollar over the week. While EUR/USD closed at its highest level since January 2015 after a +0.75% rally, EUR/CHF surged by +3.11% to close at its highest level since the Swiss National Bank removed the floor in EUR/CHF in January 2015.

Generally speaking, it appears that the factors underlying general Euro strength the past few months are also underlying the sustained jump in risk appetite: political risk has dissipated quickly from Europe; the European Central Bank is looking like it’s getting closer to announcing the next stage of tapering of its QE program; and the debt crisis doesn’t look like it’s going to reemerge anytime soon, with French and Spanish growth picking up and Greece returning to international bond markets.

Yet while we’ll see plenty of evidence of the ‘good’ that’s going on in Europe right now in the coming days – notably in the form of the preliminary Q2’17 Euro-Zone GDP report on Tuesday – we’ll also get some data that should give the ECB some cause for concern. At the start of the week, on Monday, the preliminary July Euro-Zone Consumer Price Index is set to be released. Low inflation remains a problem, according to consensus estimates, with the headline due in at +1.3% and the core in at +1.1% (y/y), unchanged from June.

The reality in FX markets is that with inflation so low, the Euro’s strength may only be tolerated for so long. The ECB’s technical assumption for EUR/USD in 2017 is 1.0800; it closed last week just below $1.1750.

A few more months of a stronger Euro, weaker energy prices, and persistent underperformance in inflation readings, and it’s easy to envision the ECB taking issue with the market’s hawkish interpretation of the policy adjustments being made. For now, it seems officials are suggesting that a step down in the QE program could come as soon as September.

If the economic calendar for the Euro this week turns out mediocre, it could give traders reason to pause with their aggressive bullish bets. Over the last few weeks, the mood has quietly been turning less bright: the Euro-Zone Citi Economic Surprise Index is down to +16.1 from +30.3 over the past four-weeks; and 5-year, 5-year inflation swap forwards, a market measure of medium-term inflation expectations, have fallen from 1.579% on June 30 to 1.557% on July 28. It would seem that the US Dollar’s ongoing soft stretch is covering up for some fundamental deterioration on the Euro’s side of things.

Market positioning would dictate that any weakness in the Euro in the near-term would be of the profit taking variety. Certainly, the Euro long trade is getting crowded (relatively speaking). According to the CFTC’s latest COT report, there were 90.8K net-long contracts held by speculators in the futures market for the week ended July 25, near thehighest level since the week ended May 3, 2011 (when EUR/USD peaked just below 1.5000). While positioning could build further, it’s important to recognize that the Euro long trade is saturated and it may be time for a breather soon.

See our Q3’17 Euro forecast - check out the DailyFX Trading Guides.

--- Written by Christopher Vecchio, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX.

To receive this analyst’s reports, sign up for his distribution list.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES