EUR/USD Price Analysis
- EUR/USD marginally higher as dollar slips.
- Expected Eurozone data leaves market fixated on U.S. later today.
- IGCS bullish.
EUR/USD FUNDAMENTAL BACKDROP
Yesterday’s Eurozone inflation data hit record 10-year record highs promoting a strong bullish move on EUR/USD. A European government bond selloff resumed which will be tested as we approach next weeks ECB meeting.
EUROZONE CORE INFLATION RATE YOY FLASH (August):
Source : Refinitiv
This triggered hawkish outlooks by some ECB policymakers in stark contrast to the rhetoric by Fed Chair Jerome Powell during last weeks Jackson Hole Symposium. Further impetus was given to Euro advocates after the U.S. consumer confidence figures for August printed well below estimates (see calendar below).
Source: DailyFX Economic Calendar
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PEPP PURCHASES REDUCTION OUTLOOK UNAFFECTED BY PMI AND UNEMPLOYMENT
The call for less ECB support has not be exacerbated by todays Eurozone data which published roughly in line with forecasts. There are a few justification being made by hawks namely:
- Greater vaccination within the Euro area, relieving COVID-19 concerns.
- High inflation.
Source: DailyFX Economic Calendar
Later today, U.S. PMI will come into focus which could shift the recent EUR/USD reaction. Previous readings were well above 50 for both ISM and Markit sources which reflects an expanding manufacturing economy. ADP employment will also carry weight as the Fed is keeping a close eye on the labour market recovery.
EUR/USD TECHNICAL ANALYSIS
EUR/USD Daily Chart:
Chart prepared by Warren Venketas, IG
The daily EUR/USD chart shows a relatively flat start to the day (at the time of writing) although the Euro clawed back some lost gains. Eurozone data was not favorable for EUR but a weaker dollar helped bolster prices. Price action reflects this via a lower extended wick on todays candle off the medium-term diagonal support trendline (black). Markets are hesitant currently as traders await key U.S. economic data later today after which some short-term directional bias may be established.
Key resistance levels:
- 1.1900
- 100-day EMA (yellow)
- 50-day EMA (blue)
Key support levels:
- 1.1800
- 20-day EMA (purple)
- 1.1680 – 23.6% Fibonacci
IG CLIENT SENTIMENT DATA ENCOURAGES NEAR-TERM UPSIDE
IGCS shows retail traders are currently distinctly short on EUR/USD, with 47% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, because the change in short positions exceeds those net long we arrive at a short-term bullish signal.
| Change in | Longs | Shorts | OI |
| Daily | 7% | 1% | 3% |
| Weekly | -39% | 111% | 10% |
--- Written by Warren Venketas for DailyFX.com
Contact and follow Warren on Twitter: @WVenketas
