EURUSD News and Talking Points
- By the end of 2019, the Fed may well have hiked another five or six times and the ECB likely just once
- Fibonacci retracement back to EURUSD 1.1200 is on the cards in the longer-term.
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EURUSD Remains Weak with Further Losses Likely in the Coming Months
The ECB gave with one hand and took away a lot more with the other hand at today’s policy announcement, leaving the EUR vulnerable to sharp losses. The QE program is now cut back to EUR15 billion a month from EUR30 billion and is set to end at the end of 2018, although this is not 100% guaranteed. ECB bond buying is also coming up against their self-imposed limits so ending of QE was always a matter of when, not if.
The ECB then undercut the single currency when they said that interest rates will remain unchanged ‘at least through the summer of 2019’, meaning Q3 is the likely first date for a 10bp or 15bp rate hike. And by the end of 2019, it is possible that the Fed will have hiked rates by 0.25% another 5 or 6 times compared to one or maybe two 10bp-15bp rate hikes by the ECB.
The latest IG Client Sentiment Indicator shows retail are 48.7% long EURUSD but recent positional changes give us a bullish trading bias.
The EURUSD chart shows Fibonacci support at 1.1448 ahead of a further drop to 1.1187. As government bond yield differentials between Europe and the US widen further, EURUSD is likely to test the lower support level.
EURUSD Daily Price Chart (December 2016 – June 14, 2018)
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--- Written by Nick Cawley, Analyst