EUR/USD Forecast: Euro Bids Post-FOMC Lose Ground in Early Trading

EUR/USD ANALYSIS

• Fed’s 75bps commentary stifles USD.
• Tomorrow’s NFP in focus.
• IG Client Sentiment: Bullish.

EURO FUNDAMENTAL BACKDROP

Yesterday’s market reaction to the Fed’s interest rate decision and press conference saw the dollar sliding across the board after Fed Chair Jerome Powell rejected the possibility of upcoming 75bps rate hikes. The Euro found some much needed respite post-announcement but early trading today saw a lack of conviction from EUR/USD bulls to continue the upside move.

Looking at the fundamental landscape facing the Euro, the announcement by EU to place a ban on Russian oil does not give much in the way of positivity for the region. Growth prospects will likely be vulnerable leaving the Euro exposed to further weakness. I still remain positive on the dollar against the Euro medium/long-term with central bank divergence being the primary driver.

The economic calendar remains relatively light today for the pair, but tomorrow’s highlight comes via the Non-Farm Payroll release. Forecasts are down at 391K from the previous 431K which could allow for a positive close for the Euro should actual data come in line with expectations.

EUR/USD ECONOMIC CALENDAR

Source: DailyFX Economic Calendar

TECHNICAL ANALYSIS

EUR/USD DAILY CHART

Chart prepared by Warren Venketas, IG

EUR/USD price action currently flirts with the 1.0600 level after yesterday’s uptick. This corrective move higher coincides with the overbought signal shown on the Relative Strength Index (RSI). Short-term, there is definitely more Euro strength on the cards (backed by IG client sentiment below) but should be limited as fundamentals favor the greenback.

Resistance levels:

• 50-day EMA (blue)
• 1.0806
• 20-day EMA (purple)

Support levels:

• 1.0471
• 1.0400

IG CLIENT SENTIMENT DATA POINTS TO SHORT-TERM UPSIDE

IGCS shows retail traders are currently LONG on EUR/USD, with 73% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, due to recent changes in long and short positioning, we favor Euro strength.

Contact and follow Warren on Twitter: @WVenketas