EUR/USD News and Analysis
- ECB Consumer Expectations Survey suggests EU inflation is here to stay
- Recent EUR/USD price action offers up range trading possibilities ahead NFP but geopolitical risks complicate matters
- Risk events to consider: Initial jobless claims data, Fed’s Mester speech, NFP
ECB’s Consumer Expectations Survey
The ECB’s consumer expectations survey revealed that consumers have lost faith in the ECB’s ability to maintain long-term inflation at 2%. Surveyed consumers foresaw higher inflation for longer, eating into their real income and an economic contraction.
The respondents foresaw inflation at 5% over the following year and at 2.8% in three years’ time.
EUR/USD Technical Setup
EUR/USD has struggled to lift off despite a weaker dollar in recent weeks as fundamental challenges (war, dwindling gas flows to Germany, hiking into weakness, inflation etc) persist.
The pair failed to break above the shorter-term descending trendline after encountering strong resistance around 1.0280 – a major level of resistance which has capped any attempt to trade higher throughout July and now the early days of August. Price action appears to be making another attempt at 1.0280 but has to contend with the 2002 level of resistance at 1.0180 first.
EUR/USD Daily Chart
Source: TradingView, prepared by Richard Snow
The 4-hour chart suggests that price action could remain within its current range (1.0100 – 1.0280) in the absence of a major catalyst and the volatility that would come along with that. Another push towards 1.0280, or the descending trendline, in the lead up to the US non-farm payroll data would certainly attract the attention of euro bears. Employment data is yet to show any significant declines and if yesterday’s employment component of PMI data is anything to go by, we are likely to see another robust figure tomorrow.
In my view, a strong NFP number provides the Fed with the green light to continue hiking rates aggressively which tends to see a softer EUR/USD. With that being said, even if we are to see a disappointing figure, the job market remains extremely well poised and therefore, if we are to see a lower or negative print, it is unlikely to shake the Fed.
Take a look at the banner for more on how to trade ranging markets:
EUR/USD 4-Hour Chart
Source: TradingView, prepared by Richard Snow
Risk Events Ahead
Today we have US balance of trade data followed by initial jobless claims which is forecast to print in the region of the prior figure of 256k. A sizeable deviation from the forecast may guide expectations ahead of tomorrow’s NFP figure. Also worth a mention is Nancy Pelosi’s visit to Taiwan which has been met with defiance from China as it conducts a number of military drills in the region. Thus far markets appear unaffected but the situation remains unknown and could change at any moment.
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--- Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
