EUR/USD Analysis
- Core and Headline EU inflation heats up!
- ECB hawkish pressure increases.
- IG Client Sentiment: Bullish.
EURO ZONE INFLATION BOOSTS HAWKISH BETS, EUR/USD HIGHER
EU core and headline inflation prints beat estimates (see economic calendar below) with Italian data following suit. The Euro has been appreciating against the greenback this week with strong labour, growth and now inflation statistics. Inflation is likely to remain elevated with rising oil and gas prices plaguing the region.
Source: DailyFX Economic Calendar
German and French headline inflation figures earlier this week set the scene for higher EU inflation this morning adding to hawkish pressure on the ECB for tomorrow’s interest rate decision. This being said, the ECB is unlikely to change its stance on inflation dissipating later in the year but questions around mounting inflationary pressures are bound to increase.
Source: DailyFX Economic Calendar
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, IG
Initial reaction post-CPI has been positive for the Euro as expected retesting the 1.1300 psychological level. A break above this key area of confluence is unlikely to warrant any material change as markets wait patiently for the ECB meeting tomorrow. A hawkish disappointment is likely and could see further downside to subsequent support zones.
Resistance levels:
- 1.1300
Support levels:
- 1.1186
- 1.1100
IG CLIENT SENTIMENT DATA FAVOURS SHORT-TERM UPSIDE
IGCS shows retail traders are currently long on EUR/USD, with 55% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but recent changes in net long and short positions respectively, results in an upside bias.
| Change in | Longs | Shorts | OI |
| Daily | 4% | 10% | 7% |
| Weekly | 2% | -4% | -2% |
Contact and follow Warren on Twitter: @WVenketas
