EUR/USD Analysis
- All eyes on U.S. central bank rate decision.
- Russia/Ukraine tensions weighing down on Euro.
- EUR/USD on the cusp of bear flag break.
EURO FUNDAMENTAL BACKDROP
The Federal Reserve’s interest rate decision later today (see economic calendar below) has markets around the world waiting with bated breath as to the forward guidance given by the Fed Chair Jerome Powell. What investors are most concerned about is “Quantitative Tightening” or the reduction of its balance sheet. In addition, an early close to asset purchases may weaken the dollar as markets may view this as an opposing force to tightening (rate hikes).
Source: DailyFX Economic Calendar
The Euro comes under pressure via elevated Russia/Ukraine tensions which may have systemic reach throughout Europe. Russia is a major oil and gas producer and courier for countries within the EU. Should sanctions be imposed by other nations in an attempt to stave off the Russians, the EUR could deteriorate further against the greenback. The U.S. dollar is typically seen as a safe-haven currency relative to the Euro leaving further downside room for EUR/USD.
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Daily EUR/USD price action has been on a downward trajectory this week leaving the 1.1300 psychological handle exposed to a break lower. This coincides with a bear flag resistance support breakout to the downside bringing into focus subsequent support targets, while a daily candle confirmation close below these aforementioned levels could prompt further downside.
Resistance levels:
- 1.1400
- 20/50-day EMA (purple/blue)
- 1.1300
Support levels:
- 1.1186
IG CLIENT SENTIMENT DATA: BULLISH
IGCS shows retail traders are currently marginally long on EUR/USD, with 59% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but the fact that changes in shorts exceed changes in longs opens up a move higher.
| Change in | Longs | Shorts | OI |
| Daily | -8% | 9% | -2% |
| Weekly | 4% | 10% | 6% |
Contact and follow Warren on Twitter: @WVenketas
