The risks are increasing on the downside

EUR/USD, FED, ECB news and analysis

  • Dollar still supported by Powell’s ‘hard-line’ comments
  • EUR/USD drops after failed attempt to trade above 1.1150
  • IG customer morale Suggests a possible short term rally in EUR/USD

Central bankers have their say

The hawkish comments from Federal Reserve Chairman Jerome Powell on Monday still echoed across all dollar pairs, as the dollar rose again. Jerome Powell said Monday that the Fed will raise interest rates further if necessary, to curb inflation. He added the possibility to raise more than 25 basis points “at a time” if needed. This opened the door for financial markets to shift expectations of a 50bp rate hike in May while raising the possibility of a potential 50bp hike in June as well.

On the ECB front, we’ve already heard from Legard Nagel and de Guindos that there are no signs of stagnation in the Eurozone economy. Nagel raised concerns about the risks of a policy tightening too late and remains open to a possible rate hike this year. Price markets are currently expecting a tightening of just under 50 basis points before the end of the year – off the Fed’s path where markets expect another 180 basis points this year.

Upcoming risk events

A notable number of Federal Reserve speakers are ending the week in the absence of significant scheduled event risks. Speakers are: Powell, Daly, Waller, Evans, Bostick, Williams and Parkin

Customize and filter live economic data via DaliyFX Economic calendar

The main technical levels for the EUR/USD pair

The daily chart of the EUR/USD pair shows the failed attempt to trade above the 1.1150 level in the wake of the Fed rate hike as the dollar pulled back a bit. It now appears that prices are heading lower again, highlighting the recent bottom at 1.0805 which also happens to underpin the long-term trend line dating back to 2017.

Continuing divergence of monetary policy would increase the attractiveness of the high-yielding dollar as opposed to the negative-yielding euro. If future Fed hikes are close to market expectations, the pair looks exposed to long downside risks.

EUR/USD daily chart

EUR/USD Price Forecast: Risks are increasing to the downside

Source: TradingView, prepared by Richard Snow

The weekly chart highlights the long-term trend line dating back to 2017 that acted as support earlier this month but may see a retest soon.

EUR/USD weekly chart

EUR/USD Price Forecast: Risks are increasing to the downside

Source: TradingView, prepared by Richard Snow

IG client sentiment indicates the possibility of a bullish recovery

EUR/USD Price Forecast: Risks are increasing to the downside

  • EUR / USD: Show retailer data 61.50% of traders are net long With the ratio of buy-to-sell traders at 1.60 to 1.
  • We usually take a file Contrasting view of the crowd’s feelingsThe fact that traders are holding indicates that EUR/USD prices may continue to fall.
  • The number of long traders is up 6.45% from yesterday and down 2.48% from last week, while the number of short traders is up 6.68% from yesterday and 15.06% higher than last week.
  • Recent changes in feelings Warning that the current EUR/USD price trend may reverse upwards soon despite the fact that traders are still net.

Written by Richard Snow for

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