Short

FX Wars Episode 4 - A new hope (for the EUR)?

Updated

First things first:
📊🔮My crystal ball tells me the US PCE inflation data today will be weaker on a monthly basis than the consensus expects it.
-> This will lead to a (temporary) weakness in the USD ✅️

...And thus a new hope for the EURO?...

Once upon a time in a FX galaxy far, far away...

The EUR has been rising against the USD for around 2 weeks and new hope is already emerging.
Will the euro rebellion break out of the upper edge of the annual range at 1,127 or will the US(D) empire nip any naive hope in the bud?

This is astonishing in view of the fact that the EUR has only suffered losses against virtually all other major pairs, such as the CAD, AUD or NZD, for weeks.
See below for my related (and profitable) trade ideas:

FX Wars Episode 2 - Attack of the CAD clones!

Ain`t no sunshine when the eurozone economy is gone

I will explain in detail in the comments why the naive breakout fantasies of the EURO rebellion will also fail against the US(D) empire.

Note

⚠️IMPORTANT: Of course it's the PCE COREinflation rate (month on month) which will surprise downwards📊🇺🇲⚠️

Note

📊🔮As announced, the US PCE core inflation data for the month was lower (0.1) than expected by the consensus (0.2).
-> Once again, my crystal ball was right🔮✅️

The result: As announced, temporary USD weakness, which saw no follow trough.

Note

🇪🇺 The EURO is staging another good +100 pips rally and is getting closer and closer to my short entry.

📊🔮 The next focus will be on the EUR inflation data at the beginning of January. These will show a rise in inflation and lift it back towards the 3% mark.
-> This could put the ECB in the wrong boat, as this boost will only be temporary due to base effects and a one-off effect from the German energy price brake.

The February and March inflation data at the latest will clearly show the misconception of the ECB about higher inflation in the long term ✅️

Note

📊This week we will see a lot of US Data: Beginning with the JOLTS Report and the ISM Manufacturing tomorrow and closing with the ISM Services and the NFP on friday.
🟢-> This data will decide if I will get my favourite entry at the 1.127 - 1.13 mark (if the data is very weak)
OR
🟢-> If I have to be way more patient and probably search for a shortterm short entry in EURUSD (if the data is very strong)
-> Lets see!

Note

📊🇪🇺PPI Data out of the Eurozone will come weaker today than the consensus expects it.

-> Not great for the EUR but the NFPs and ISM will be more important for the longterm direction✅️

Note

📊🇪🇺As forecasted the PPI Data out of the Eurozone was weaker than the consensus expected it.
-> easy✅️

📊🇪🇺The February CPI out of the Eurozone will be the most exciting EUR data since a long time, since it will determine when we will get the first ECB rate cut
-> My base case is still April✅️

📊🇺🇲US Data was more mixed, with the NFPs stronger but the ISM weaker.
-> US CPI tomorow will decide the direction for this pair for the coming days

Note

📊🇺🇲 Both the US CPI (inflation data) and the jobless claims surprised positively today
🟢 -> This is good for the USD in the long term and makes it harder for the EUR to rally against the greenback. Maybe I will find a shortterm entry in the EURUSD (by of course shorting it) but thats a theme for next week.

Note

📊🇺🇲 The US data was brutally strong recently and consequently led to continued USD strength.
🇪🇺 The euro, one of the weakest currencies this year (anyone following my trade ideas will be unsurprised ;), was unable to escape the USD steamroller 🇺🇲

This means that the EURUSD still lacks a lot to trigger my entry.
-> I will remain patient and keep an eye on events.
Sell the rallies in EURUSD remains the order of the day🟢

Note

This week we have the
📊🇪🇺 PMI (Purchasing Managers' Index) for the eurozone and the
🏛🇺🇲 meeting of the US FED -> both are extremely important data points for the EURUSD.

Meanwhile, the pair is getting closer and closer to an extremely attractive short zone.
-> I will wait for this week's events before possibly building a short position in the EURUSD 🟢

Note

🔮My crystal ball tells me:
📊🇪🇺The EUR Inflation data (CPI) will come weaker today than the consensus expects it.
-> This will weigh on the euro in the long term🟢

Note

🔮 As predicted, the 📊🇪🇺EUR inflation data was lower than expected by consensus.
-> The EUR subsequently saw weakness
-> EURUSD is (slowly) heading south again🟢
-> All conditions (for the ECB) to cut interest rates are met ✅️

🏛🇪🇺 Nevertheless, I expect the ECB (out of sheer stubbornness) to wait until June for the first rate cut.
-> If Lagarde hints at interest rate cuts for June AND July today, the beatings for the EUR will continue until morale improves💥💥💥

PrimeTrading

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