EURUSD Under Pressure Focus Shifts to US FOMC Meeting
EURUSD Technical Overview:
Pivot: 1.1765
Day Trading Range: 1.1800 - 1.1690
Key Resistance: 1.1760 - 1.1788 - 1.1810 - 1.1835
Key Support: 1.1735 - 1.1718 - 1.1694 - 1.1674
Technical Indicator:
RSI: The indicator shows bullish divergence but still moving around level 50.
Moving Average: SMA 100(1.1735) strong support, SMA 20(1.1756) & SMA 55(1.1757) strong resistance for EURUSD today.
Technical Trade Idea:
Most Likely Scenario: short positions below 1.1765 with targets at 1.1728 & 1.1700 in extension.
Alternative scenario: above 1.1765 look for further upside with 1.1780 & 1.1798 as targets.
Fundamental:
The common currency rose to 1.1815 yesterday after the European Central Bank (ECB) head Mario Draghi took note of the "relatively vigorous" pick-up in the underlying price pressures and rising wage-price inflation. However, he added further that the pick-up in inflation is conditional on interest rates staying low through next summer, dashing hopes of an early rate hike.
As a result, the common currency surrendered gains and ended up creating a bearish outside-day doji, which indicates the rally from the Aug. 15 low of 1.301 has likely run out of steam.
Global markets saw a mixed dollar in North American market hours after ECB President Draghi’s economic update to the EU Parliament sent the euro through 1.18 temporarily on hawkish rhetoric, signaling the ECB’s forward intentions when he explained that “a relatively vigorous pick-up in underlying inflation” was underway, underscoring an improving labor market and signs of shortages, supporting the ECB’s expectations of higher wages. EUR/USD jumped from 1.1750 to 1.1815 – a three-month high – on Draghi’s speech. However completely retraced a few hours later, as ECB chief undercuts his own bullish comments on inflation with warnings over potential effects from protectionism, and also perhaps due to the unease surrounding Italy’s fiscal plans and indeed ahead of the FOMC later this week. The EUR/USD could feel the pull of gravity amid rising treasury yields, having created a big outside-day doji candle yesterday.
EU’s Trade Commissioner Cecilia Malmstrom commented that “talks between the EU and the US remain in an exploratory stage, and getting down to the hard details of a limited trade agreement between the two are not going to begin until a trade meeting slated for early November ” while at a United Nations General Assembly.
Investors turn their focus back on this week’s key event risk – the highly anticipated FOMC decision on Wednesday, where the central bank is widely anticipated to raise interest rates by 25bps. The US 10yr treasury yield made a four-month high at 3.09% and the Fed sensitive 2yr yields hit 2.83% to make a fresh high since 2008. The Fed fund futures yields continued to price 100% chance of a hike on Wednesday, while the chance of another hike in Dec is priced at 90%.
On the data front, the German wholesale price index (WPI) is scheduled for release at 06:00 GMT. Further, ECB's Praet is scheduled to speak at 08:25 GMT and ECB's Coeure is due to speak at 12:00 GMT.
Thanks
YoCryptoManic
Pivot: 1.1765
Day Trading Range: 1.1800 - 1.1690
Key Resistance: 1.1760 - 1.1788 - 1.1810 - 1.1835
Key Support: 1.1735 - 1.1718 - 1.1694 - 1.1674
Technical Indicator:
RSI: The indicator shows bullish divergence but still moving around level 50.
Moving Average: SMA 100(1.1735) strong support, SMA 20(1.1756) & SMA 55(1.1757) strong resistance for EURUSD today.
Technical Trade Idea:
Most Likely Scenario: short positions below 1.1765 with targets at 1.1728 & 1.1700 in extension.
Alternative scenario: above 1.1765 look for further upside with 1.1780 & 1.1798 as targets.
Fundamental:
The common currency rose to 1.1815 yesterday after the European Central Bank (ECB) head Mario Draghi took note of the "relatively vigorous" pick-up in the underlying price pressures and rising wage-price inflation. However, he added further that the pick-up in inflation is conditional on interest rates staying low through next summer, dashing hopes of an early rate hike.
As a result, the common currency surrendered gains and ended up creating a bearish outside-day doji, which indicates the rally from the Aug. 15 low of 1.301 has likely run out of steam.
Global markets saw a mixed dollar in North American market hours after ECB President Draghi’s economic update to the EU Parliament sent the euro through 1.18 temporarily on hawkish rhetoric, signaling the ECB’s forward intentions when he explained that “a relatively vigorous pick-up in underlying inflation” was underway, underscoring an improving labor market and signs of shortages, supporting the ECB’s expectations of higher wages. EUR/USD jumped from 1.1750 to 1.1815 – a three-month high – on Draghi’s speech. However completely retraced a few hours later, as ECB chief undercuts his own bullish comments on inflation with warnings over potential effects from protectionism, and also perhaps due to the unease surrounding Italy’s fiscal plans and indeed ahead of the FOMC later this week. The EUR/USD could feel the pull of gravity amid rising treasury yields, having created a big outside-day doji candle yesterday.
EU’s Trade Commissioner Cecilia Malmstrom commented that “talks between the EU and the US remain in an exploratory stage, and getting down to the hard details of a limited trade agreement between the two are not going to begin until a trade meeting slated for early November ” while at a United Nations General Assembly.
Investors turn their focus back on this week’s key event risk – the highly anticipated FOMC decision on Wednesday, where the central bank is widely anticipated to raise interest rates by 25bps. The US 10yr treasury yield made a four-month high at 3.09% and the Fed sensitive 2yr yields hit 2.83% to make a fresh high since 2008. The Fed fund futures yields continued to price 100% chance of a hike on Wednesday, while the chance of another hike in Dec is priced at 90%.
On the data front, the German wholesale price index (WPI) is scheduled for release at 06:00 GMT. Further, ECB's Praet is scheduled to speak at 08:25 GMT and ECB's Coeure is due to speak at 12:00 GMT.
Thanks
YoCryptoManic
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