EUR/USD News and Analysis
- ECB members reiterate the same message – leaving the euro susceptible
- We take a closer look at key support levels for the free-falling EUR/USD
- Main risk events for the week ahead
ECB Members Reiterate the Same Message – Leaves Euro Susceptible
The ECB’s Centeno and de Guindos join Schnabel, Villeroy and Nagel in call for rate hikes to start after the ECB puts an end to bond purchases. The constant reiteration of the ECB’s stance further supports euro depreciation against the dollar, in light of the fact that the Fed is only just getting started on its rate hiking cycle despite already reaching 1% on the upper bound. This afternoon we see a number of ECB and Fed speakers with Nagel and Schnabel as well as Mester and Kashkari in the public eye.
Major central banks like the Fed, Bank of England (BoE) and Bank of Canada (BoC) have been perceived by some as having taken too long to tighten monetary policy in the wake of surging inflation which reflects poorly on the euro as the European Central Bank (ECB) is yet to achieve lift-off. Current guidance states that the first rate hike in the bloc is due to take place early in Q3 with the 21st of July meeting identified as a convenient opportunity to do so. Rates markets agree that July will welcome the first rate hike as the July expectations currently factor in a 25 basis point hike. Between now and then, the Fed is estimated to hike another 50 basis points in June.
EUR/USD Updated Technical Levels
After breaching the 1.0500 level, EUR/USD looks all the more likely to head towards parity in the months ahead. For now though, EUR/USD trades within the large (orange) support zone which had supported EUR/USD in the past on multiple occasions – refer to the monthly chart below for a better picture of this.
The most immediate level of support appears at the 1.0340 level – the 2017 low – with 1.0310 and 1.0180 (refer to monthly) as the next levels of support. Resistance comes in at 1.0450 and 1.0500.
EUR/USD Daily Chart
Source: TradingView, prepared by Richard Snow
The monthly EUR/USD chart allows us to step back and analyze the longer-term major levels as the euro is on track to depreciate to levels not seen in decades as parity edges ever closer.
EUR/USD Monthly Chart
Source: TradingView, prepared by Richard Snow
Main Risk Events Ahead
The economic calendar is fairly light next week as US retail sales and EU inflation data are likely to steal the spotlight. A miss in US retail data could see a temporary move lower in the dollar, translating to a slight lift for EUR/USD. However, any reprieve is likely to be short-lived. EU inflation could appear to be flattening out as the expected headline figure comes in at 7.5% vs a prior 7.4% print, although, inflation data has a tendency to surprise to the upside so this outcome is assigned a fairly low probability but should still be considered.
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--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
