EUR Analysis and News:
- EZ GDP Prints Largely In-Line
- All Eyes on the ECB’s Possible Hawkish Pivot
- EUR/USD Recovers Slightly as USD Unwinds Recent Gains
EUROZONE GDP: Y/Y 4.6% vs Exp. 4.7%, Q/Q 0.3% vs Exp. 0.3%
GDP largely in line with consensus, albeit a slight miss on the yearly rate. A muted reaction for the Euro, given that much of the focus this week will be on the ECB meeting and whether they will provide their own hawkish pivot to some degree, in light of elevated inflation.
EUR/USD: A modest bounce to begin the week for the Euro, with the move stemming from the unwind of the US Dollar’s recent bullish breakout. The question for the USD is whether it can maintain upside in the face of softer US data, which has been a recent theme. The Fed are clear in their approach that they will be tightening monetary policy, however, with Fed Fund Futures very much priced for Fed tightening, further gains on this front will be limited. Elsewhere, the Italian President has secured his re-election, providing political stability and thus the Bund/BTP spread has tightened some 5bps, aiding the Euro, particularly against safe-havens.
Taking a look at the technical picture, the RSI is showing a bullish divergence with the lower low in the price, not confirmed by the indicator. As such, this could perhaps be more of a signal to suggest that the momentum on the downside has slowed, as opposed to a significant trend reversal. As a reminder, I noted that the USD was overstretched in the short term, given the upside being exacerbated by the month-end flows
EUR/USD Chart: Daily Time Frame
Source: Refinitiv
| Change in | Longs | Shorts | OI |
| Daily | 9% | -16% | -1% |
| Weekly | -11% | 22% | -2% |
Trader data shows 70.76% of traders are net-long with the ratio of traders long to short at 2.42 to 1. The number of traders net-long is 6.22% higher than yesterday and 21.53% higher from last week, while the number of traders net-short is 12.12% higher than yesterday and 22.99% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall.
Positioning is less net-long than yesterday but more net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.
Source: DailyFX
