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Some relief for the EUR/USD as core EU inflation continues to rise at 3.8% -by Ecork

EUR/USD trading points

  • Ongoing inflation pressures in the EU support the optimistic bets.
  • The European Central Bank is walking a tightrope.
  • EUR/USD is holding above 1.05 at the moment.

Basic Euro Backup

The heart of the eurozone inflation The print came out as expected 3.8% (See calendar below) for the month of May that strengthen euro Post-release bullishness after a negative start to the European trading session. We can expect this to continue rising as crude oil and natural gas supplies continue to be constrained leaving the Eurozone in a tight spot. The Euro is in no way reversing a long-term downtrend, adding to inflationary pressures giving the European Central Bank more thought as it struggles with widening bond spreads and the Euro fading.

The economic calendar shifts to the US as we close out the week with focus on Federal Reserve Chair Jerome Powell as well as industrial production numbers that could have some impact on the EUR/USD pair.

EUR/USD economic calendar

source: DailyFX Economic Calendar

In the lead up to today’s core inflation reading, the euro fueled global currency purchases against the euro dollar After expectations about tightening spread around the world and the dollar fell. However, my medium/long term view remains dollar-friendly as the Eurozone faces greater (uncertain) challenges relative to the US.

Bond margins are a concern for European Central Bank (ECB) Last night, President Christine Lagarde confirmed that there are plans to place limits on bond spreads to avoid further concerns in the region.

Technical Analysis

EUR/USD daily chart

euro vs dollar daily chart

The graph was prepared by Warren VenkitasIG

price movement On the daily chart of the EUR/USD, the bulls are showing barely pulling back from what would have been a significant drop lower if the 1.0340 The support handle has been hacked. While the Euro has got some support from external factors, if prices reach a major confluence around trendline resistance (black), I would look for the next downside as the central bank divergence remains heavily skewed towards the Fed and Dollar later.

Resistance levels:

  • trend line resistance (black)
  • 1.0601
  • 50 day moving average (blue)
  • 20-day EMA (purple)

Support levels:

IG customer sense data: mixed

IGCS shows offline retailers long on me EUR / USDwith 69% of traders who are currently holding long positions (as of this writing). At DailyFX we usually take a conflicting view with crowd sentiment, but due to recent changes in long and short positions, we arrive at a mixed bias.

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