EUR/USD to Remain Supported by Hawkish ECB as Sintra Meeting Heats Up
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EUR/USD PRICE FORECAST:
- EUR/USD to Remain Supported by Hawkish ECB Chatter.
- ECB Forum Delivers Blockbuster Panel of Central Bankers Today as Governors of the BoJ, BoE, ECB and the US Fed take the stage.
- German Gfk Consumer Confidence Deteriorates.
- To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section.
US DATA, HAWKISH ECB POLICYMAKERS, ECB FORUM
EUR/USD enjoyed a decent rally yesterday despite the return of US Dollar strength in the US session following positive US data. However, this was largely offset by ongoing hawkish commentary from European Central Bank (ECB) policymakers at the ECB Forum in Sintra, Portugal.
According to reports, ECB policymakers see little reason for a pause in rate hikes at this stage despite signs of a slowdown in the Euro Area. This morning we heard further comments from policymaker Luis de Guindos who stated that the July rate hike is set with September likely to depend on data. Such ongoing hawkish rhetoric is likely to keep the Euro supported in the interim with EURUSD likely to remain rangebound.
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Gfk CONSUMER CONFIDENCE AND FRENCH INFLATION
Over the past week German data has been a drag on the Euro Area with signs of slowing growth and deteriorating confidence. The Bundesbank stating as much in a recent update discussing the growth prospects for the German economy with minimal growth predicted for Q2. The Gfk Consumer Confidence number had been on a steady upward trajectory since October 2022 before the decline seen from today’s print which came in at -25.4 Vs -23 forecasted figure. On a positive note, French consumer confidence improved slightly but remains in pessimistic territory with a print of 85, up from 83 in the previous month.
Not a lot in terms of risk events on the docket today for both the Euro Area and the US with Italian inflation US Bank Stress Tests the only real highlight. The European Central Bank (ECB) Forum is likely to remain a key driver for market moves as sentiment is likely to shift back and forth. Today sees the ECB Forum deliver a powerhouse panel of Central Bankers with Powell, Ueda, Bailey and ECB’s Lagarde to take the stage. I do accept hawkish comments from both Powell and particularly Bailey given the Bank of England’s (BoE) challenges and recent 50bps rate hike. However, the question on everyone’s lips will likely be whether Bank of Japan (BoJ) Governor Ueda is finally ready to adopt a more hawkish tone given comments of intervention by the Japanese Minister of Finance amongst others.
For all market-moving economic releases and events, see the DailyFX Calendar
TECHNICAL OUTLOOK AND FINAL THOUGHTS
Looking at EURUSD from a technical perspective and we continue to receive mixed signals. Following a break of structure, yesterday’s bullish engulfing candle close also printed a Morningstar pattern if you will, hinting at a bullish continuation and at odds with the overall price action picture hinting at downside continuation.
As mentioned above EURUSD seems to be driven the fundamental factors in play at the moment with ECB hawks likely to keep Euro supported above the 1.0900 handle while hawkish comments from Fed Chair Jerome Powell later today could cap any attempted break back above the 1.1000 handle. For now, caution and a short-term approach around the recent range may be the best option as the bull vs bears tussle continues.
EUR/USD Daily Chart – June 28, 2023
Key Levels to Keep an Eye On
- 1.0875 (50-day MA)
- 1.0814 (100-day MA)
IG CLIENT SENTIMENT DATA
IGCSshows retail traders are currently SHORT on EURUSD, with 62% of traders currently holding SHORT positions. At DailyFX we typically take a contrarian view to crowd sentiment, and the fact that traders are short suggests that EURUSD may enjoy a short bounce before continuing fall.
Trading Strategies and Risk Management
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Written by: Zain Vawda, Market Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.