Global instability limits the rise of the euro
EUR/USD TALKING POINTS
- Recession fears are gripping global markets.
- Anti-fragmentation spotlight for Europe.
- EUR/USD trading at key technical levels.
FUNDAMENTAL CONTEXT OF THE EURO
With the few moving events in the market over the weekend, the global market, including the euro was left at the mercy of market sentiment. The situation in Ukraine and Russia’s decisions could weigh negatively on the euro zone in the event of a cut in energy flows to the region. The economic calendar is also light this week (see below), prioritizing recession fears leading to the start of high-impact events on Wednesday. That being said, the morning news helped bolster euro bets after Deutsche Bank CEO’s hawkish comments about raising rates faster than expected, while talk around the anti-fragmentation tool are set to be the talk of town over the next few weeks. Should the ECB manage to clarify or agree on a way forward regarding “anti-fragmentation”, this could be extremely bullish for the Euro.
Of dollar outlook, quarterly/half-yearly flows supported the greenback last week, which could give the euro some short-term respite, while we could see some subdued price action today due to the Day’s holiday of Independence in the United States
EUR/USD ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
EUR/USD DAILY CHART
Chart prepared by Warren VenketasGI
price action on The EUR/USD daily chart shows the bulls once again defending the key support area around 1.0340 (Jan 2017 low). This key inflection point could mark the start of a prolonged decline with the formation of the recent descending triangle pattern which will require a confirmation break under support. A rejection would therefore occur if we see a break above the triangle resistance coinciding with the swing high of 1.0601.
- Trendline resistance (black)/50-day EMA (blue)/1.0601
- 20-day EMA (purple)
IG CUSTOMER SENTIMENT DATA: BEARISH
The IGCS shows that retail traders are currently LONG on EUR/USDwith 70% of traders currently holding long positions (as of today). At DailyFX, we generally take a contrarian view of crowd sentiment, resulting in a downside bias.
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