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EURUSD Rebound Temporary; Renewed Euro Weakness Ahead

EURUSD Rebound Temporary; Renewed Euro Weakness Ahead

Nick Cawley, Strategist

EURUSD – Market News and Technical Analysis

- EU migration deal may calm nerves in Germany

- US-EU trade wars will still be a major driver of price action.

- Euro upside is limited as EU interest rate hikes may not happen till 2020.

The latest IG Client Sentiment Indicator shows retail are 57.9% long EURUSD yet recent positional changes give us a mildly bullish short-term outlook.

EURUSD Rallies into Quarter-End but Bulls’ Joy may be Fleeting

Early Friday the European Union came to an agreement on migration including setting up migrant centres within the EU and beefing up external borders. While this may appease Italy, who have recently taken a strong anti-migrant stance, the full acceptance of the agreement in Germany is more important, especially if Angela Merkel is to keep her coalition government intact.

The market’s reaction to the news saw the single currency bounce higherbut gains are likely to be short-lived as other factors come back into play. The fractious EU-US trade war continues and is likely to ramped-up as US President Donald Trump continues with his ‘America First’ program, while interest rates in the EU are staying low for longer. The ECB suggested that rates will not rise until Q3 2019 at the earliest. The latest market talk is that the EU deposit rate may be raised by 0.10% to -0.30%, a symbolic gesture more than an effective monetary policy lever.

EURUSD continues to bounce back from around 1.1500, which may be aided by option expiries, quarter-end rebalancing and potential central bank intervention to ease the euros recent fall. EURUSD may struggle to break above 1.17175, a combination of the November 7 swing-low and the 38.20% Fibonacci retracement of the January 2017 – February 2018 rally. To the downside, 1.15540 may hold ahead of 1.15000 and 50% Fibonacci retracement at 1.14480.

EURUSD Daily Price Chart (October 2016 – June 28, 2018)

EURUSD Rebound Temporary; Renewed Euro Weakness Ahead

If you are new to foreign exchange, or if you would like to update your knowledge base, download our New to FX Guide and our Traits of Successful Traders to help you on your journey.

What’s your opinion on the EURUSD and the EU’s latest move on migration?

Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst

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

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