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EUR/USD Price Remains Under Pressure After Lowly Inflation Data; US NFP Next Important Release

EUR/USD Price Remains Under Pressure After Lowly Inflation Data; US NFP Next Important Release

2020-10-02 09:31:00
Nick Cawley, Strategist
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EUR/USD Price, News and Analysis:

  • Inflation falls further in the Euro Area and that’s a problem for the ECB
  • US Labor Report may shift EUR/USD sentiment.
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Euro area inflation remains stubbornly low, according to the initial September data. Annual inflation turned further negative to -0.3% compared to -0.2% in August, while core inflation y/y fell to 0.2% from a prior reading of 0.5%. All today’s readings missed expectations.

EUR/USD Price Remains Under Pressure After Lowly Inflation Data; US NFP Next Important Release

This persistent price weakness in the single block will continue to concern the ECB who remain willing to open the liquidity floodgates once more to get inflation back to - and above in the short-term if needed - their mandated level around 2%.

EUR/USD Price Remains Under Pressure on Lowly Inflation Expectations

EUR/USD continues to struggle to stay above 1.1700 and yesterday’s print and retreat from 1.1768 may likely be the high point for the pair in the short-term. As I mentioned recently, the double print around 1.1600/1.1610 should continue to act as initial support.

NFP and Forex: What is NFP and How to Trade it?

The next driver of price action will come from this afternoon’s US Labor Report (NFPs) with the market expecting further improvement in the US jobs market, albeit from still woefully low levels.

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EUR/USD Daily Price Chart (January – October 2, 2020)

EUR/USD Price Remains Under Pressure After Lowly Inflation Data; US NFP Next Important Release
EUR/USD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -7% -9% -8%
Weekly -23% 20% 3%
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IG Retail trader data 35.98% of traders are net-long with the ratio of traders short to long at 1.78 to 1. The number of traders net-long is 8.00% lower than yesterday and 18.88% lower from last week, while the number of traders net-short is 1.89% lower than yesterday and 2.77% higher from last week.We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.

Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias.

What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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

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