Market Analytics and Considerations
Key Points
The EUR/USD exchange rate is still determined by USD variables.
ECB speakers’ conflicting messages exacerbate ambiguity.
The rising wedge on the daily chart is still important.
MIXED EURO FUNDAMENTAL FORECAST
Following better-than-anticipated Non-Farm Payroll (NFP) statistics that confirmed the tight labour market in the U.S., the euro retreated below the 1.05 mark on Friday. The upward surprise in average earnings may have contributed to ongoing inflationary pressures. The euro is benefiting from many extraneous environment rather than acts taken within the eurozone, such as loosening COVID restrictions in China, a dovish Jerome Powell, lower gas costs, and declining inflation in the United States. This exposes the euro to outside forces and might put pressure on the currency should the momentum turn.
More dovish statements have come from ECB President De Guindos than from Christine Lagarde. De Guindos has stated that even though a recession will eventually hit the eurozone, it won’t be as bad as initially anticipated. The first quarter of 2023 is expected to see a decrease in inflationary pressures, which should be detrimental to the euro. The ECB President will speak again during the next weekend, and it is probable that he will discuss battling inflation while leaving open the possibility of a third consecutive 75-bps interest rate increase. Money markets are presently pricing in a 54bps increase for the December meeting,
A decrease in natural gas prices (Dutch TTF) has boosted the eurozone from an energy standpoint, enabling businesses to take advantage of cheaper input costs and a favorable attitude through both consumers and enterprises. The economic schedule for the following week is rather lighter than it was the week before, although it does include the ISM services statistics for the United States. This figure is crucial for assessing the state of the economy as a whole because the U.S. economy is mostly based on the provision of services. Since both core PCE and CPI inflation have shown indications of declining, PPI will also be crucial. Powell’s previous claim that prices will remain high for extended will be undermined by another PPI decline, which will further worsen the USD’s problems.
For the first time since June 2021, the week candle on the EUR/USD chart has been modestly trading it above 200-day SMA For lateral bias over the short term, this week’s closure will be crucial. There may be room for more gains if the weekly candle finishes or above 200-day SMA.
After the dollar grew stronger post-NFP, the daily EUR/USD market movement shows that the rising wedge formation is still being taken into account. If a candle falls above wedge resistance, this pattern will be invalidated. However, the latest euro gain may be weakening as the Relative Strength Index (RSI) reaches overbought territory.
With 58% of traders presently carrying short bets, retail traders are currently SHORT on EUR/USD .We frequently take an opposite stance from the general consensus, which results in a short-term positive bias.
Resistance Zones
• 1.0615
• Wedge resistance
• 1.0500
Support Zones
• 1.0369/200-day SMA
• Wedge support
