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EURUSD Turns Higher But The US Dollar Remains Bullish

EURUSD Turns Higher But The US Dollar Remains Bullish

Nick Cawley, Senior Strategist

Euro and US Dollar News and Charts:

  • Fed Powell dampens expectations, but multiple rate hikes remain on the table.
  • EURUSD remains in a downtrend while the US dollar basket remains bullish.

We have just released our Brand New Q4 Trading Forecasts including USD and EUR.

EURUSD Nudges Back Towards 1.1400 – Hurdles Remain

Fed Chair Powell gave markets a nudge yesterday evening suggesting that the current level of rates is just below the broad range of estimates of the level that would be neutral for the economy. Investors took this as a dovish shift, but o second reading the wording of Powell’s speech refuted that. While in September Powell said that rates ‘were a long way from neutral’, yesterday he widened this by saying that rates were just below the ‘broad range of estimates’ of the level of rates that would be neutral for the economy. With the broad range of 2.5% to 3.5% and a current Fed Funds rate of 2% to 2.25%, this gives a median of 3 to 4 rate hikes of 0.25% before we hit Powell’s target.

The US Dollar basket (DXY) dipped lower but remains in a strong uptrend, underpinned by interest rate expectations. The basket has rallied from a low of just under 88 in February this year and currently trades at 96.20, just off its recent 1near 18-month high at 97.16. While a further small dip cannot be discounted, the firm trend higher will provide support for the US dollar around the 95.50 – 96.00 area.

US Dollar Basket (DXY) Daily Price Chart (February - November 29, 2018)

EURUSD remains pointed to the downside with a series of unbroken lower highs dominating the charts from late-September. The pair need to break and close above the 1.1470 – 1.1475 area to break this trend before 1.1625 and 1.1660 come into view. On the downside support appears at 1.1300 ahead of 1.1215 and 1.1187.

IG Client Sentiment Data shows investors are currently 61.3.0% net-long EURUSD,a contrarian bearish signal, and recent daily and weekly positional shifts (longs grew by 34.2% from last week) give us a stronger bearish trading bias.

EURUSD Daily Price Chart (March – November 29, 2018)

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on EURUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.com or via Twitter @nickcawley1.

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

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