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Euro Latest: EUR/USD Recovery Faces Hurdle, Powell Risk Ahead

Euro Latest: EUR/USD Recovery Faces Hurdle, Powell Risk Ahead

Justin McQueen,
What's on this page

EUR/USD Price Analysis & News

  • Fed Fallout Dicates Price Action
  • USD Overextended, Support on Pullbacks Expected
  • Tough Hurdles Ahead on EUR/USD Recovery

Fed Fallout Dicates Price Action

The fallout from last week’s hawkish Fed surprise continues to reverberate around the market with the USD remaining firm, while the 5s30s UST curve flattens further. Fed speak will remain on the top agenda with a whole host of speakers scheduled this week, not least Chair Powell due to speak tomorrow. On Friday, Fed’s Bullard stated that the Fed may need to raise rates in 2022 as he sees inflation running at 3% in 2021 and 2.5% the following year, thus highlighting Bullard’s switch to a more hawkish stance.

USD Overextended, Support on Pullbacks Expected

Across the FX space, the 2% rally in the greenback since Wednesday looks somewhat overdone in the short run. While the USD has a good case to extend higher, with the dust settling slightly and with risk sentiment stabilising as equities pull off overnight lows, the greenback may retrace and break back below 92.00. That said, pullbacks are likely to be met with good demand, particularly against funding currencies where central banks have yet to signal steps to normalise policy, namely the ECB.

Tough Hurdles Ahead on EUR/USD Recovery

EUR/USD has found support at 1.1850, which also coincides with the 23.6% Fib of this year’s range. However, should the pair reclaim 1.1900, resistance at 1.1950 and 1.1900 are likely to represent areas where traders will attempt to fade gains.

EUR/USD Chart: Daily Time Frame

Source: Refinitiv

FX OPTION EXPIRIES: 1.1900 (686m), 1.1940-50 (1.7bln), 1.1975-80(720m), 1.2000 (620m), 1.2065-70 (1.2bln), 1.2100-10 (4.0bln)

Brief Explainer on option expiries: Sizeable option expiries can act as support and resistance as option traders look to remain delta neutral, in turn, spot prices can be magnetised to large option strikes.

EUR/USD Bullish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 8% 10% 8%
Weekly -1% 2% 0%
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