EUR/USD ANALYSIS
- German exports surprise beat while overall Balance of Trade misses.
- Lagarde and Villeroy try to ease markets.
- Potential for bullish crossover to unfold?
- IG Client Sentiment: Mixed
EURO FUNDAMENTAL BACKDROP
Early trading this morning sees the Euro under pressure as the U.S. dollar opens higher along with a slight contraction in German Balance of Trade data for December. An increase in exports is a positive sign as global chip shortages hampered production in 2021 resulting in weak export data.
Source: DailyFX Economic Calendar
Banque de France governor Villeroy announced yesterday that markets have overreacted to the ECB’s rate announcement last week while President Christine Lagarde echoed similar notions earlier this week. The ECB’s Schnabel is scheduled to give comments later today and based on her prior hawkish sentiments, we could see an undoing of her peers attempts to calm the market.
This being said, the main driver this week for EUR/USD is the U.S. inflation data release tomorrow (see calendar below) with expectations higher (7.3%) than previous (7.0%). A print beat may see a significant dollar strength as markets add to mounting hawkish bets.
Source: DailyFX Economic Calendar
TECHNICAL ANALYSIS
Chart prepared by Warren Venketas, IG
The daily EUR/USD chart may be setting up for Euro strength via the bullish EMA crossover (blue) despite market hesitancy ahead of the US CPI release tomorrow. The Relative Strength Index (RSI) suggests strong upside momentum and has room to move higher. Price action is very much data and news dependent short-term so monitoring of information coming in is key.
Resistance levels:
- 1.1500
Support levels:
- 1.1400/100-day EMA
- 50-day EMA/20-day EMA
- 1.1300
IG CLIENT SENTIMENT DATA HESITANT
IGCS shows retail traders are currently short on EUR/USD, with 60% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, the recent change in long and short positioning result in a mixed bias.
| Change in | Longs | Shorts | OI |
| Daily | -5% | 14% | 5% |
| Weekly | 12% | -5% | 2% |
Contact and follow Warren on Twitter: @WVenketas
