EURUSD 1.0467 Target Achieved, New Pattern Emerging
Technical & Trade View
EURUSD
Trade View
1.0467 Target Achieved, New Pattern Emerging
Bias: Bullish Above Bearish below 1.0285
Technicals
Primary support is 1.0285
Primary upside objective is 1.0620
Next pattern confirmation, acceptance above 1.05
Failure below 1.0270 opens a test of 1.0165
20 Day VWAP bullish, 5 Day VWAP bullish
Today’s New York Cut Option Expiries: 1.0200-10 (1.83BLN), 1.0225-35 (428M), 1.0250-55 (1.02BLN), 1.0350 (394M), 1.0370 (1.93BLN)
Institutional Insights
According to analysts at Credit Agricole ‘EUR/USD is expected to remain under pressure in the next 3-6M. The war in Ukraine has fanned stagflation headwinds in the Eurozone and should further have lasting consequences for the Eurozone’s international competitiveness, external position, relative real yields and commodity terms of trade. The ECB has embarked on policy normalisation in the face of these risks. The vulnerability of the Eurozone periphery in the face of diminishing monetary support further complicates its task. That said, we think that the ECB should ultimately be able to contain spikes in Eurozone credit risks. This, coupled with growing rates, should make the EUR a more attractive safe-haven currency from here and help it benefit from repatriation of funds held abroad back into the Eurozone. Many negatives seem to be in the price of undervalued and oversold EUR/USD, which could ultimately recover in 6-12M’
According to analysts at Goldman Sachs ‘We think it is justified that the FCI eased—and the Dollar weakened—following the lower-than-expected US inflation report. The softer outturn increases the probability that a softer landing is achievable, in part because it will probably support a somewhat slower tightening cycle in the near term, and will potentially support a more methodical hiking path ahead. That said, we think the move probably extended beyond what is justified by the fundamentals. It has long been our view that weaker inflation is the only way to fundamentally break out of the FCI Loop in a constructive direction. But it seems too early to completely head for the exit; there is still a long road ahead to more acceptable inflation levels, and some of the biggest surprises this month are not particularly durable. But more structurally, the economy remains sufficiently resilient so that material further FCI easing is likely to become self-defeating. And it is worth bearing in mind that, while there is substantial uncertainty, our standard models show that the economy is already moving through the peak negative impulse from tighter financial conditions. Outside of the US, recent news has also been negative for the Dollar: surprisingly resilient hard data in the Euro area have pushed back severe recession fears, and incremental signals toward relaxing Covid restrictions in China have also supported risk sentiment. H owever, we also think these developments are insufficient to change the fundamental picture in the near term. The Euro area outlook remains troubling, although those risks could be somewhat backloaded, and still there is an element that more robust global activity could become self-defeating for Europe in a world where energy supply is still constrained. While recent data in the US and abroad have altered some of the tail risks, we still think the baseline outlook is likely to feature relatively resilient US activity, and a longer Fed hiking cycle, with few high-quality alternatives among the majors. We expect the recent Dollar weakness to reverse but it is likely to be a slower, choppier process as positioning adjusts to lower tail risks’
EURUSD
Trade View
1.0467 Target Achieved, New Pattern Emerging
Bias: Bullish Above Bearish below 1.0285
Technicals
Primary support is 1.0285
Primary upside objective is 1.0620
Next pattern confirmation, acceptance above 1.05
Failure below 1.0270 opens a test of 1.0165
20 Day VWAP bullish, 5 Day VWAP bullish
Today’s New York Cut Option Expiries: 1.0200-10 (1.83BLN), 1.0225-35 (428M), 1.0250-55 (1.02BLN), 1.0350 (394M), 1.0370 (1.93BLN)
Institutional Insights
According to analysts at Credit Agricole ‘EUR/USD is expected to remain under pressure in the next 3-6M. The war in Ukraine has fanned stagflation headwinds in the Eurozone and should further have lasting consequences for the Eurozone’s international competitiveness, external position, relative real yields and commodity terms of trade. The ECB has embarked on policy normalisation in the face of these risks. The vulnerability of the Eurozone periphery in the face of diminishing monetary support further complicates its task. That said, we think that the ECB should ultimately be able to contain spikes in Eurozone credit risks. This, coupled with growing rates, should make the EUR a more attractive safe-haven currency from here and help it benefit from repatriation of funds held abroad back into the Eurozone. Many negatives seem to be in the price of undervalued and oversold EUR/USD, which could ultimately recover in 6-12M’
According to analysts at Goldman Sachs ‘We think it is justified that the FCI eased—and the Dollar weakened—following the lower-than-expected US inflation report. The softer outturn increases the probability that a softer landing is achievable, in part because it will probably support a somewhat slower tightening cycle in the near term, and will potentially support a more methodical hiking path ahead. That said, we think the move probably extended beyond what is justified by the fundamentals. It has long been our view that weaker inflation is the only way to fundamentally break out of the FCI Loop in a constructive direction. But it seems too early to completely head for the exit; there is still a long road ahead to more acceptable inflation levels, and some of the biggest surprises this month are not particularly durable. But more structurally, the economy remains sufficiently resilient so that material further FCI easing is likely to become self-defeating. And it is worth bearing in mind that, while there is substantial uncertainty, our standard models show that the economy is already moving through the peak negative impulse from tighter financial conditions. Outside of the US, recent news has also been negative for the Dollar: surprisingly resilient hard data in the Euro area have pushed back severe recession fears, and incremental signals toward relaxing Covid restrictions in China have also supported risk sentiment. H owever, we also think these developments are insufficient to change the fundamental picture in the near term. The Euro area outlook remains troubling, although those risks could be somewhat backloaded, and still there is an element that more robust global activity could become self-defeating for Europe in a world where energy supply is still constrained. While recent data in the US and abroad have altered some of the tail risks, we still think the baseline outlook is likely to feature relatively resilient US activity, and a longer Fed hiking cycle, with few high-quality alternatives among the majors. We expect the recent Dollar weakness to reverse but it is likely to be a slower, choppier process as positioning adjusts to lower tail risks’
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