EUR/USD ANALYSIS
- Villeroy hawkish comments pile on to bullish sentiment.
- Spotlight on FOMC Minutes.
- IG Client Sentiment points to short-term hesitancy.
EURO FUNDAMENTAL BACKDROP
Yesterday saw a double dose of support for the Euro with tensions around Russia/Ukraine fading along with the ECB’s Villeroy stating that net asset purchases (PEPP + APP) could end by Q3. Price action reacted favorably propping up EUR/USD by 0.44% yesterday and continues in the green today.
Should geopolitical pressures remain subdued, the Euro could see extended gains throughout the day as we approach the upcoming FOMC minutes. The minutes mark the most crucial release this week as markets have been plagued by varying viewpoints in terms of the upcoming Fed rate hike – which is basically 100% priced in. The confusion for markets is the rate hike percentage increase. We have heard of 25bps, 50bps and even 100bps as potential figures but most are split between the 25bps and 50bps camps. I do not foresee a 100bps jump but markets will be looking for guidance around which camp has the majority.
ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
TECHNICAL ANALYSIS
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, IG
The daily EUR/USD chart has found support at the 1.1300 psychological handle and trading above the 20 and 50-day EMA’s respectively today. Scope to reach 1.1400 is highly likely unless the FOMC minutes take an even more hawkish reaction.
Resistance levels:
- 1.1400
Support levels:
- 20-day EMA/50-day EMA
- 1.1300
IG CLIENT SENTIMENT DATA CAUTIOUS
IGCS shows retail traders are currently long on EUR/USD, with 51% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, with longs and shorts so evenly split we are left with a mixed disposition.
| Change in | Longs | Shorts | OI |
| Daily | -7% | 16% | 0% |
| Weekly | -3% | 20% | 4% |
Contact and follow Warren on Twitter: @WVenketas
