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EUR/USD dips lower, German PMI improvesWelcome to the first trading day of the New Year. Trading remains thin, as most markets are closed.  In the European session, EUR/USD is trading at 1.0679, down 0.23%. I expect a quiet day for the euro. There are no US events on the schedule. German Manufacturing PMI improved to 47.1 in December, up from 46.2 in November and shy of the consensus of 47.4 points. Manufacturing remains below the 50.0 level that separates contraction from expansion, and expectations remain pessimistic. The silver lining to a gloomy situation is that the outlook has improved slightly, as the December release was the strongest in three months. It was a similar pattern in the eurozone, as the Manufacturing PMI rose to 47.8, up from 47.1 in November, also a three-month high. Manufacturing in Germany and the eurozone has suffered a tough year, and demand remains weak. The global outlook remains uncertain and with the ECB promising further rate hikes, the risk-to-demand outlook is tilted to the downside. Still, December showed an improvement, as concerns over an energy crisis have lessened and inflation has eased. We'll get a look at key inflation releases this week. German publishes December CPI on Tuesday, followed by eurozone CPI on Friday. Both indicators are pointing to inflation heading lower, which could have an impact on ECB rate policy. The ECB raised rates by 50-bp in December and meets next on February 2nd. If anyone needed a sober forecast for 2023, there was one today from the International Monetary Fund. The head of the IMF, Kristalina Georgieva, warned that 2023 would be tougher than last year, as the US, EU and China would see growth slow. Georgieva said that she expected one-third of the global economy to be in recession. In October, the IMF cut its growth outlook from 2.9% to 2.7%, due to the war in Ukraine as well as central banks around the world raising interest rates. EUR/USD is testing support at 1.0674. Below, there is support at 1.0566 There is resistance at 1.0782 and 1.0852
by OANDA
Euro shrugs as Spain's inflation dropsIt's the last trading day of 2022, and EUR/USD is almost unchanged in what should be a quiet day in the currency markets. In the European session, EUR/USD is trading at 1.0674, up 0.13%. The week between Christmas and New Year's is usually very light on data, and there were no tier-1 events in Germany or the eurozone this week. Earlier today, Spain released the initial CPI estimate for December, which showed that inflation continues to weaken. CPI dropped to 5.8%, down from 6.8% and below the estimate of 6.0%. Inflation in Spain slowed for a fifth successive month, as energy costs keep coming down. Headline CPI is down sharply from a peak of 10.8% in July, but the news was not all positive, as core inflation rose to 6.9%, up from 6.3%. The Spanish inflation report kicks off a host of eurozone inflation releases next week. Investors will be hoping that the German and eurozone CPI data will mimic the Spanish release and point to inflation heading lower. The ECB will be keeping a close eye on these inflation reports, and the data will be an important factor in the ECB's decision as to the pace of future rate increases. The ECB delivered a 50-bp hike earlier this month, down from the 75-bp increase in October. ECB President Lagarde warned the markets not to view the move as a dovish pivot and said that more rate hikes were on the way. ECB Vice Vice-President Luis de Guindos reiterated Lagarde's hawkishness last week, saying that 50-bp rate hikes "may become the norm in the near future." 1.0660 is a weak support line. Below, there is support at 1.0616 There is resistance at 1.0702 and 1.0778
by OANDA
1
Euro higher as US jobless claims riseWe're seeing limited movement in the currency markets this week, which is not uncommon during the week between Christmas and New Year's. Trading volume remains thin and the data calendar is very light. In the North American session, EUR/USD is trading at 1.0649, up 0.35%. The US released unemployment claims today, one of the highlights in a quiet week. Initial jobless claims climbed as expected to 225,000, up from 216,000. A rise in week-to-week claims should not alarm investors, as there is bound to be some fluctuation in the releases. The 4-week moving average, which smooths out these fluctuations, remained virtually unchanged at 221,000. There are no tier-1 releases out of Germany or the eurozone this week. On Friday, Spain releases CPI for December, and inflation in the eurozone's fourth-largest economy could signal what to expect from next week's German and eurozone inflation releases. Inflation in Spain has been steadily dropping, from a peak of 10.8% in July to 6.8% in November. The downtrend is expected to continue in December, with a consensus of 6.1%. The ECB has sent out hawkish messages lately, with Vice-President Luis de Guindos saying last week that "Increases of 50 basis points may become the new norm in the near term." De Guindos added that the ECB was concerned that the markets might underestimate the persistence of inflation. Fed Chair Jerome Powell would wholeheartedly agree, as the Fed has found it tough going to convince the markets that it remains hawkish and plans to continue raising rates into 2023. The markets jumped on a couple of soft US inflation reports as an indication that the Fed would pivot and become dovish, sending the US dollar sharply lower. It was only after a hawkish Fed meeting earlier this month that the markets seemed to get Powell's message. Still, the Fed remains concerned that such speculation could loosen market conditions and complicate the Fed's painstaking battle to curb inflation. EUR is testing resistance at 1.0660. Above, there is resistance at 1.0746 1.0574 and 1.0488 are providing support
by OANDA
EUR/USD Daily Chart Analysis For Week of December 23, 2022Technical Analysis and Outlook: The euro-dollar stays put under our Mean Res 1.0680. The prevailing down path points to the Mean Sup 1.0470, and extended probabilities to Mean Sup 1.0330 is a high degree of certainty. However, the upside move to retest Mean Res 1.0680 and Key Res $1.0780 is possible within the current market sentiment. Of course, the question is always, 'Which way will this puppy break from the current position?'.
by TradeSelecter
EUR/USD Corrective ShortAfter last weeks FED and ECB markets were left adjusting to Powell and Lagarde's comments. FED will have to continue on with rate hikes well into Q2 '23 when they can start a pivot of no hikes, but certainly not making any cuts either. Rates will be held until they feel they have things 'under control'. While Lagarde sounded 'hawkish' it doesn't change high inflation is here to stay and global growth concerns are starting to take headlines, weighing on sentiment. I scalped the range last week but focused on shorts after fibonacci extension target was reached at 1.07350. I took short from 1.07250 closing at the end of the week at 1.06050. This week I took entry short back at that same level, 1.06050 **If SL gets hit, it’s only 10 pips and I’ll hop in on a long scalp into 1.06500 - 1.06800 Market can range with end of year low volume so its best to cut it quick when you know a key level is failing and get in at a better entry. At the end of the day, trade you own levels..but I hope you found to be decent
Short
by Krecioch
2
EUR/USD Daily Chart Analysis For Week of December 16, 2022The euro-dollar rip through our Mean Res 1.0585 but could not punch to vital Key Res $1.0780. The newly created interim Mean Res 1.0680 is the catalyst to draw the currency to retest the Mean Res 1.0680 and hit the Key Res $1.0780 in the process. The prevailing down path points to the Mean Sup 1.0450 and mildly extended probabilities to Mean Sup 1.0330. However, once the current down sentiment occurs, a furious decline to the additional Mean Support levels may likely happen. Of course, the question is, “From which support level will this puppy break playing down movement position?
by TradeSelecter
EUR/USD moving around 1.0600, far from the weekly high The EUR/USD is trading sideways on Friday, managing to stay above 1.0600, despite the strength of the dollar and the decline in equity markets, still favored by the European Central Bank meeting on Thursday. It peaked at 1.0735, the highest since June and then pulled back to as low as 1.0590. It is up for the week, but off highs. The ECB raised interest rates by 50 basis points on Thursday, and President Christine Lagarde gave an outlook at the press conference suggesting at least three more 50 basis point hikes to come at the next meetings. Her comments pushed German government bond yields higher while US Treasury yields held steady, giving strong support to the euro. The common European currency was among the best performers on Thursday, in a day in which there was a sharp global decline in equity markets, amid fears of a recession. The dollar was strengthened by the risk aversion environment. This prevented the EUR/USD from going above 1.0700 again. The ECB's tone helped it remain above 1.0600, at a time when other currencies fell to multi-day lows versus the dollar. Technically, the EUR/USD maintains a bullish trend. The upside was capped at 1.0730 and showed signs of weakness after failing to hold above 1.0700. A consolidation above 1.0700 is needed for the euro to open the doors to more gains over the short term. Technical indicators are neutral, and mostly flat, with no clear bias. There are some signs of bullish exhaustion (particularly the retreat from the weekly high) that could lead to a bearish correction, especially if the pair clearly breaks below 1.0600. The next strong support is seen at 1.0500. More to the downside emerges 1.0440 that if broken could change the outlook to neutral.
by Alex_Boltyan_FXAnalyst
1
EURJPY long End of Day trend follower (EOD)Here is what the fundamentals are following the ECB rate decision today, words from ©Lloyds Bank European Central Bank (Dec): We're not pivoting The European Central Bank (ECB) raised interest rates today by 50bps, in line with expectations. It follows 75bp hikes in the last two meetings in September and October, and a 50bp rise in July. There was broad agreement (not unanimity) on the decision and it brings the deposit rate up to 2%. There were similar increases in the main refinancing rate and the marginal lending rate to 2.5% and 2.75%, respectively. Policy rates have been raised by a total of 250bp since July (Chart 1). Although the hiking pace was reduced today, the ECB warned that interest rates will “still have to rise significantly” and that they will be kept at “restrictive levels” to dampen demand and guard against second-round effects on inflation. President Christine Lagarde indicated that more 50bp rises could occur early next year (the next update is on 2 February). She said, “we’re not pivoting” and that the ECB is “in for a long game” and there is more ground to cover. Current inflation was described as “far too high” (Chart 4) and forecast to stay above target for what is seen as “too long”. The ECB’s new quarterly economic projections upgraded inflation for 2023 to 6.3% (from 5.5%) and for 2024 to 3.4% (from 2.3%). The first forecast for 2025 is 2.3%, still above the 2% target (Chart 2). The ECB envisages a “short and shallow” recession – while next year’s GDP growth was revised down to 0.5%, it remains above the consensus forecast (Chart 3). Detail on the start of quantitative tightening (QT) – the reversal of QE – was also provided today. The ECB said that from March it will no longer reinvest fully the proceeds from maturing assets held in its Asset Purchase Programme (APP) portfolio. From March until the end of Q2 next year, the average decline will be €15bn a month, meaning that about half of estimated redemptions wil be reinvested (Chart 7). This degree of detail could also be interpreted as hawkish, because it reinforces the impetus to reduce the ECB’s balance sheet (Chart 6). Overall, while today’s interest rate decision was expected, the messaging was nevertheless surprisingly hawkish. There seems to be increasing disquiet about persistent upside surprises to inflation and the extended period in which it is expected to remain above target, while the economic downturn is now perceived as potentially less severe than previously feared. The market reaction saw the euro rise above $1.07 for the first time since June, while the pound fell below €1.15. Markets now expect the ECB ro raise interest rates above 3% next year. Hann-Ju Ho Senior Economist That may be the fundamental reason and may be I am a little early in my trade idea as today's candle hasn't closed.I am assuming that we don't make a new higher high before the end of the NYC session.
Long
by Macrobriefing
ECB vs BoE: What's next for EUR/GBP?The European Central Bank (ECB) and the Bank of England (BoE) both raised interest rates by 50 basis points at their final meetings of the year. The Eurozone's policy rate was hiked to 2.5%, the highest in fourteen years, and the UK's to 3.5%, the highest since late 2008. In contrast to the relatively dovish BoE meeting, the ECB meeting was substantially more hawkish than the market had anticipated, prompting the EUR/GBP cross to surge. In a divided vote, the BoE decided to raise rates by 50bps, with one member (Mann) pressing for 75bps and two members (Tenreyro and Dhingra) preferring to maintain current rates. According to the BoE statement, more increases in the Bank Rate may be necessary due to ongoing inflationary pressures fueled by a tight labour market. In the first quarter of 2023, UK CPI inflation is expected to fall as household spending and property market indicators weaken. Even if the ECB lowered its speed of rate rises from 75bps to 50bps, it made it clear that interest rates will still have to climb consistently and by a steady pace to reach restrictive levels to get inflation back to 2% quickly. The ECB also indicated that quantitative tightening will begin in March 2023. The ECB will not reinvest all expiring securities' principal payments in the Asset Purchase Programme (APP), meaning its asset portfolio of eurozone bonds will fall at an average pace of €15 billion per month until Q2 2023, with the subsequent rate established over time. During the press conference, ECB President Lagarde reiterated that the ECB will rise with tenacity and that 50bps may be the right rate hike for the next meeting and the two after that. She also hinted that once the peak is achieved, "it won't be enough to hit and withdraw," and that high interest rates will be in place for a longer period of time. Historically, the interest-rate gap between the Euro Area and the UK has been one of the key driver behind the EUR/GBP exchange rate. Market reactions to the BoE and ECB meetings: Yields differential matter Before today's meeting, the market was highly dovish on the ECB, pricing in a peak of 2.8% next year, while it had already built in hawkish expectations on the BoE, pricing in a peak of 4.6% in the Bank Rate in August 2023. German bond yields soared by 15 basis points after the ECB rate announcement and during Lagarde's press conference, but UK gilt yields stayed nearly unchanged from pre-BoE meeting levels. The negative yield spread between German and UK sovereign bonds shrank throughout the curve today as investors repriced ECB rise expectations. The 2-year German-UK yield gap narrowed to -1% and the 10-year one to -1.2%.  In the coming weeks/days, market expectations for the ECB rate may continue to rise as ECB hawks are likely to reiterate their aggressive stance. The Bank of England's market pricing may stay broadly stable, given it has already incorporated heightened expectations ahead to the meeting. This may indicate that the negative yield disparity between German and British bonds will continue to narrow, exerting upward pressure on the euro-pound exchange rate. A further 30 basis point reduction in the negative yield spread between 2-year German bonds and UK gilts, lowering it from -1% to -0.70%, might drive EUR/GBP to 0.89 or near to the psychologically important level of 0.90.
by Capitalcom
Hawkish ECB but Euro still fallsThe ECB presented a strong hawkish front; - hiking rates by 50bps and commenting during the press conference that - MORE hikes were coming, - 50bps for a period of time, not pivoting, - committed for the long term to bring inflation down to 2% This saw the EURUSD climb strongly from 1.0620 up to 1.0735 HOWEVER , right after the press conference ended, the dollar bulls took control, driving the EURUSD back down. Back down toward the key support level of 1.06. Where could the EURUSD head from here? Stay tuned! This would be a HAWK and BULL battle worth watching.
by JinDao_Tai
4
European Central Bank Preview – Time to PivotDespite facing the unknown external shock of a war, the Eurozone economy’s growth has been resilient in the first three quarters of the year. Eurozone Gross Domestic Product (GDP) rose by 0.3% quarter-on-quarter (QoQ) in Q3, easing from a 0.8% increase in Q2 2022 aided by the rise in government spending alongside an improvement in inflation adjusted trade surplus . However, this is likely to change in Q4 2022 and Q1 2023 as COVID reopening demand fades. Eurozone recession remains a key risk until Q1 2023 Europe is set to embark on a harsh winter, and with savings rates extending the decline from a 1.7% drop in Q2, consumer spending is likely to come under pressure. The 1.8% month on month falls in euro area retail sales in October is consistent with the notion that real income squeeze is now catching up the with consumers. Services spending rose only 1.5% in Q3 compared to the 3.1% jump in Q2 2022 . The labour market has remained fairly resilient as Eurozone unemployment hit a new low of 6.5% in October, pushed down by falling unemployment in Southern Europe, the Netherlands, Finland and Austria. However, unemployment is likely to rise as the economic slowdown and tightening financial conditions impact hiring. That being said, fiscal policy could come to the rescue as major Eurozone governments have earmarked €573Bn into the economy to shield the private sector from the upcoming fallout in economic activity. Inflation in the Eurozone declined more than expected from 10.6% in October to 10% in November. Yet it’s hard to say for certain that the inflation rate has passed its peak as it is largely dependent on the fluctuations in energy prices. Core inflation remained at 5% in November and is likely to remain close to 5% through Q1 2023 . Companies continue to transfer higher input costs to consumers and in spite of an approaching recession, we expect this process of cost-push inflation to extend into 2023, keeping price pressures higher for longer. European Central Bank (ECB) split between the doves and hawks Ms Isabel Schnabel (a member of the executive board of the ECB) warned in November that loose fiscal policy risks adding to underlying inflation pressures by boosting consumption and reducing the incentive for consumers and businesses to save energy. We would argue that while the volume of relief packages is large, they are insufficient to provide complete relief for all consumers and companies. Ms Schnabel also noted that, “that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the ‘neutral rate’”. This hawkish sentiment was echoed by Dutch central bank head Klaas Knot in his statement that risks are tilted towards the ECB doing too little to combat rising inflation, noting that an economic slowdown, or perhaps even a recession, is needed to bring inflation under control. President Lagarde stressed that she would be surprised if inflation has already peaked, as there is too much uncertainty regarding the pass-through of high energy costs at the wholesale level into the retail level. She added that the ECB may have to go into restrictive territory with key rates. On the other hand, the head of the French central bank, Villeroy, who has often anticipated the actual ECB decisions in his statements, spoke out in favour of 50 basis points. Even hawks such as Bundesbank President Nagel and Estonian Mueller seem to be able to come to terms with a hike of just 50 basis points. Further clarity on Quantitative Tightening (QT) The ECB is likely to meet consensus expectations this week of narrowing the pace of rate hikes to 50Bps on 15 December, following two 75Bps rate hikes in September and October. This decision will lift its deposit and refinancing rates to 2% and 2.5% respectively. Neither peaking inflation nor a recession will give the ECB a reason to hold back from raising rates in Q1 2023, but both suggest that risks are tilted towards a slower pace of tightening. The outlook for the balance sheet, and more specifically QT, will be another key theme at this week’s meeting. It will be interesting to see whether the ECB will be pressed to sell bonds outright or stick with roll-off. We would expect the central bank to begin with an Asset Purchase Program (APP) roll-off equivalent to a monthly reduction of €25Bn in the balance sheet on average. Currently the ECB is still using Pandemic Emergency Purchase Programme (PEPP) reinvestments to compress spreads and the Transmission Protection Instrument (TPI) remains at its disposal if conditions deteriorate further. Both these tools limit how far the ECB can go with QT. Sources: 1Eurostat as of 30 November 2022 2National Accounts as of 30 November 2022 3Bruegel as of 31 October 2022 4Bloomberg as of 30 November 2022
FRED:ECBASSETSW
by aneekaguptaWTE
EUR/USD Daily Chart Analysis For Week of December 9, 2022Technical Analysis and Outlook: The euro dollar hit our target of the Mean Res 1.0585 twice this week. Advancement to the Key Res 1.0780 is getting more realistic and inevitable. The upcoming prevailing down path points to the new Mean Sup 1.0450 and extended Mean Sup 1.0330. However, once the current down sentiment occurs, a furious decline to the additional Mean Support levels may likely happen. Of course, the question is always “Which way will this puppy break from the current position?”
by TradeSelecter
EUR/USD Remains Capped By 1.0600, Fed, ECB Decisions Eyed The EUR/USD pair consolidates above the 1.0500 area on Friday, still unable to advance beyond the 1.0600 mark, with the pair edging lower after the release of U.S. Producer Price Index data.   At the time of writing, the EUR/USD pair is trading at the 1.0540 area, posting a 0.16% daily loss, having retreated from a high of 1.0588 earlier in the session. The pair is virtually unchanged in the week, trading just a few pips above last Friday’s closing price, following two consecutive weekly gains.   The 10-year U.S. bond yield bounced off a daily low of 3.45% and rose above 3.50%, fueling the greenback’s recovery. The DXY index is currently trading around 104.90, having recovered from a low of 104.48.   Data from the U.S. showed producer prices grew at a 7.4% annual rate in November, matching the market’s expectations and slower than the 8.1% rate reported in October. The core PPI rose by 6.2% YoY, above the expectations of 6% but below the 6.7% rate printed in October.   On Tuesday, U.S. Consumer Price Index data could offer a better picture of the inflation situation and finish shaping the investors' expectations about Fed’s decision, which will be announced on Wednesday. According to the WIRP tool, a 50 bps rate hike is fully priced in, and investors are only betting around 10% odds of a larger 75 bps move. In addition, the swaps market is pricing in a peak policy rate of 5.0%.   The European Central Bank will announce its decision on Thursday, and expectations also point to a 50 bps increase in its main rates, although Lagarde & Co. could "surprise" with a 75 bps move. From a technical perspective, the EUR/USD pair retains the short-term bullish bias despite indicators on the daily chart losing some traction. The RSI remains in positive territory with a slightly negative slope, while the MACD stands right above its midline.   On the upside, the immediate resistance level is given by the 1.0600, where the psychological level is reinforced by a descending trend line drawn from May 2021 high, followed by the 1.0700 area. On the other hand, the following support levels are seen at the 20- and 200-day SMAs at 1.0410 and 1.0350.
by Alex_Boltyan_FXAnalyst
As we approach the last Fed/ECB meetings of the year.Last week, while the Federal Reserve changed its rhetoric from ‘hiking to fight inflation at all cost’ to ‘slow the pace of rate hike’, seismic waves rolled over the markets. As we approach the last central bank meetings of the year, the ECB meets on (15th Dec), Fed on the (14th Dec). A temperature check on the expected path of rates for the 2 major central banks would give us a good sense to position ourselves. The Fed After Fed Chair Jerome Powell’s speech last Wednesday at the Brookings Institution in Washington, one line in particular (“The time for moderating the pace of rate increases may come as soon as the December meeting.”) shifted the market’s perspective. With the USD weakening further and terminal rates repricing slower and lower than expected, markets seem to have priced in a 50-basis point hike by the Fed in its December meeting. A slowdown from the back-to-back 75 basis point hikes we have come accustomed to. As noted in the chart above the EURUSD pair has generally moved alongside the dollar direction, should the dollar continue its tumble downwards, the EURUSD is likely to trade higher. The ECB After raising rates by 75 basis points in the last meeting to 1.5%, the ECB still faces mounting inflation. Market expectations still swing between a 50 to 75 bps hike for the upcoming ECB meeting as the Eurozone still struggles with high inflation. The ECB may also have more headroom to maneuver as current rates remain below the expected terminal rate and the 200 basis points hike still pales in comparison to the Fed’s 375 basis points move. However, we do have to caveat that intricacies matter here, for example, the inflationary effects in the US are largely driven by the demand side, while in the Eurozone are driven by supply-side effects. Regardless, the next few days will remain key for any policymaker comments to guide the markets as the meeting date nears. Policy timing and direction uncertainty put the EURUSD pair on our watchlist. The last time the 2 central banking policy timelines diverged, we called it out on one of our previous ideas. You can check out here . Additionally, we spot an ascending triangle pattern on the chart which generally signifies a bullish continuation. With the previous ascending triangle breaking out in a textbook manner, we will watch if the current setup trades the same. Prices have also broken a previous support-turn-resistance level, which could prove as further conviction of the upward move. With a clear technical setup and the potential for the ECB to surprise hikes to the upside, we lean bullish on the EURUSD pair. We set our stop at the 1.0440 level, and take profit level at 1.0900, with each 0.00005 increment per EUR in the EURUSD futures contract equal to 6.25$. The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com Disclaimer: The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description. Sources: www.cmegroup.com www.ecb.europa.eu www.federalreserve.gov
CME:6EZ2022Long
by inspirante
9
Euro pauses after sharp gains, NFP loomsEUR/USD is unchanged on Friday, trading at 1.0524. The week wraps up with one of most important releases on the calendar, US nonfarm payrolls. The robust labour market is showing signs of cooling down, as rising interest rates have slowed economic activity. Nonfarm payrolls have been falling and the trend is expected to continue, with a consensus of 200,000 for November, down from 261,000 a month earlier. With the Fed holding its policy meeting on December 14th, the NFP report will be closely watched by policy makers, who have relied on a strong job market to press ahead with an aggressive rate cycle. The US dollar has been in retreat since Jerome Powell's speech on Wednesday. The speech was balanced, with Powell reiterating that inflation remained too high and rates would continue to rise higher. Still, the markets focussed on the fact that Powell strongly hinted the Fed would ease rates at the December meeting with a 50-bp hike, and the optimism sent equities higher and the dollar lower. The euro has made the most of the dollar's weakness, and EUR/USD posted its best month since 2012, with gains in November of 5.3%. Still, the euro has been on a prolonged decline and started 2022 close to 1.14. The outlook for the euro is weak, as the European Commission expects the eurozone economy to decline in Q4 2022 and Q1 2023. The driver of the expected decline is the huge jump in energy prices caused by the war in Ukraine. The eurozone has been hit hard by double-digit inflation, and the ECB will have to continue raising rates, despite weak economic conditions, until it is convinced that inflation has peaked. EUR/USD faces resistance at 1.0583, followed by a monthly line at 1.0683 There is support at 1.0490 and 1.03537
by OANDA
EUR/USD edges higher as CPI fallsIt continues to be a quiet week for the euro. In the European session, EUR/USD is trading at 1.0363. The ECB's number one priority has been bringing down inflation, which has hit double-digits. ECB policy makers are no doubt pleased that November CPI fell sharply to 10.0%, down from 10.6% a month earlier. This beat the consensus of 10.4%, and the euro has responded with slight gains. The drop in eurozone inflation was the first since June 2021, and investors will be hoping that this indicates that inflation is finally peaking. On Tuesday, German CPI showed a similar trend, falling to 10.0%, down from 10.4% (10.3% est). Still, eurozone Core CPI remained unchanged at 5.0%, matching the forecast. One inflation report is not sufficient to indicate a trend, and with inflation still in double digits, nobody is declaring victory in the battle against inflation. Still, the drop in German and eurozone inflation increases the likelihood of a 50 basis-point increase at the December 12th meeting, following two straight hikes of 75 basis points. With market direction very much connected to US interest rate movement, a speech from Fed Chair Jerome Powell later today could be a market-mover. Powell is expected to discuss inflation and the labour market, and his remarks could echo the hawkish stance that Fed members have been signalling to the markets over the past several weeks. The market pricing for the December meeting is 65% for a 50-bp move and 35% for a 75-bp hike, which means that the markets aren't all on the Fed easing rates. Even if the Fed does slow to 50 bp in December, it will still be a record year of tightening, at 425 basis points. EUR/USD is testing resistance at 1.0359. Above, there is resistance at 1.0490 There is support at 1.0264 and 1.0131
by OANDA