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EUR/USD Outlook - Testing 1.1300, Driven by Ongoing US Dollar Strength

EUR/USD Outlook - Testing 1.1300, Driven by Ongoing US Dollar Strength

Nick Cawley, Strategist

EUR/USD Price, Chart, and Analysis

  • A break of 1.1300 round number support may lead to further losses.
  • Commentary from Fed hawk James Bullard out shortly.

The supportive monetary policy background and the heightened tensions on the Ukraine border, where Russian troops continue to grow, have further boosted the value of the US dollar at the start of the week. The US dollar basket (DXY) is in positive territory for the fourth day in a row and at highs seen nearly two weeks ago as the rates market continues to price in up to seven 0.25% interest rate hikes in the US this year. The latest leg higher in the greenback came in a speech by Fed voter James Bullard after the latest inflation report who said that he would like to see 100bps of rate hikes by July 1 and suggested a 50bp hike is not off the table. Mr. Bullard speaks at 13:30 GMT today and it will be worth seeing if he doubles down on these comments or if he rows back on his previous hawkishness.

US Dollar Basket (DXY) Daily Price Chart – February 14, 2022

EUR/USD Outlook - Testing 1.1300, Driven by Ongoing US Dollar Strength

The daily EUR/USD chart shows the pair sitting on 1.1300 and looking to drift lower. While this round number is not in itself a high importance technical level, it does sit in the middle of a recent range of highs and lows. If the pair look to move lower, these old prints should act as a buffer on the way down.

Psychological Levels and Round Numbers in Forex Trading

A confirmed break below 1.1300 opens the way to the 1.1220/40 area of prior low prints before sub-1.1200 levels come into play. Traders should note that volatility levels (ATR) are at multi-month highs and should factor those into their trading plans when looking for stop loss and exit levels.

EUR/USD Daily Price Chart - February 14, 2022

EUR/USD Outlook - Testing 1.1300, Driven by Ongoing US Dollar Strength

Retail trader data show 50.09% of traders are net-long with the ratio of traders long to short at 1.00 to 1. The number of traders net-long is 11.09% higher than yesterday and 20.62% higher from last week, while the number of traders net-short is 13.90% higher than yesterday and 29.07% 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.

What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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