EURUSD At A Turning Point?
The rally in the EUR stemming from last week’s hawkish ECB meeting has seen EURUSD breaking out above the bear channel for the first time this year. With plenty of bullish divergence on momentum studies into recent lows, there is room for a fuller recovery here. The sharp shift in ECB rates has fuelled a reversal in recent EURUSD dynamics. With policy divergence between the ECB and the Fed quickly eroding, EUR is playing catch up. The ECB was clear in signalling the need for further rate increases moving forward, in line with upwardly revised inflation forecasts. With this in mind, there is plenty of room for EURUSD to continue higher near term, in line with the retail community being heavily short the pair. Bulls can look for a break of the 1.0364 level, targeting a run up to 1.0775 initially.
Keep An Eye On
Tomorrow’s US CPI data will be the key event to monitor. On the back of a softer reading in July, if US CPI was seen dropping again last month, this will add strength to the view that inflation has peaked/ is peaking in the US, adding further downside pressure to USD, allowing EURUSD to rally further. On the other hand, if US CPI was seen surging higher again last month, this will turn traders’ attention back towards Fed tightening expectations, likely weighing on EURUSD near-term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.