Never miss a story from David Song

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Euro Talking Points

The recent rebound in EUR/USD unravels ahead of the updates to the U.S. Consumer Price Index (CPI), with the exchange rate at risk of making a run at the June-low (1.1508) as it snaps the series of higher highs & lows from earlier this week.

Image of daily change for major currencies

EUR/USD Rebound Unravels Ahead of Updates to U.S. Consumer Price Index (CPI)

Image of daily change for eurusd

The Euro is back under pressure even as the European Central Bank’s (ECB) economic bulletin highlights expectations for ‘solid and broad-based economic growth,’ and the single-currency stands at risk of facing headwinds over the remainder of the year as the Governing Council remains in no rush to move away from its easing-cycle.

Even though the quantitative easing (QE) program is set to expire in December, the ECB may keep the door open to further support the monetary union as the central bank struggles to achieve its one and only mandate for price stability. After adjusting the exit strategy in June, it seems as though President Mario Draghi & Co. will deliver additional details at the next quarterly meeting in September as the asset-purchase program gets throttled down to EUR 15B/month starting in October, but the central bank may continue to strike a dovish forward-guidance for monetary policy as officials pledge to ‘ensure the ample degree of monetary accommodation necessary for the continued sustained convergence of inflation towards levels that are below, but close to, 2% over the medium term.

Image of fed fund futures

With that said, the diverging paths for monetary policy continues to cast a long-term bearish outlook for EUR/USD especially as Fed Fund Futures continue to reflect expectations for four rate-hikes in 2018, but updates to the U.S. Consumer Price Index (CPI) may keep euro-dollar in its current range as both the headline and core rate of inflation are expected to hold steady in July.

The CPI print may do little to boost the appeal of the greenback as it curbs the risk for a prolonged period of above-target inflation, and EUR/USD may continue to consolidate ahead of the central bank meetings scheduled for next month as the exchange rate tracks the range-bound price action from June.

EUR/USD Daily Chart

Image of eurusd daily chart
  • The June-low (1.1508) sits on the radar for EUR/USD as it snaps the bullish sequence from the previous week, with the lack of momentum to push back above the 1.1640 (23.% expansion) to 1.1680 (50% retracement) region raising the risk for a further decline in the exchange rate.
  • Will keep a close eye on the lower bounds of its recent range which comes in around the1.1510 (38.2% expansion) region, but a break/close below the stated region brings the downside targets back on the radar, with the first region of interest coming in around 1.1390 (61.8% retracement) to 1.1400 (50% expansion) followed by the 1.1290 (61.8% expansion) hurdle.

For more in-depth analysis, check out the Q3 Forecast for the Euro

Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

Image of DailyFX economic calendar

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.