EUR/USD rebound exposed amid failure to hold above 50-day SMA

EUR/USD Rate Talking Points

The EUR/USD has ended last week’s series of highs and lows as the US Consumer Price Index (CPI) update fuels speculation for another 75bp Federal Reserve rate hike, and a rebound from the exchange rate. can continue to give. Yearly low (0.9864) as it appears to be tracking negative slope in the 50-day SMA (1.0107).

EUR/USD rebound exposed amid failure to hold above 50-day SMA

The EUR/USD may largely reflect the previous month’s price action as it struggles to hold above the moving average, and the exchange rate phase is yet another test of the December 2002 low (0.9859) as well. tries. European Central Bank (ECB) insists that the decisions taken at the September meeting “mark the transition from the current highly accommodative level of policy rates to levels that will ensure a timely return of inflation to our medium-term target of two percent.”

In the meantime, stability in consumer prices may encourage the Federal Open Market Committee (FOMC) to maintain its current approach to combating inflation because vice Chair lil brainard The argument is that “it will be necessary to see several months of low monthly inflation readings to be sure that inflation is heading back to 2 percent,” and that the EUR/USD will continue to face headwinds ahead of a Fed interest rate decision on September 21. could. The CME Fedwatch tool now shows a 100% probability for a 75bp rate hike.

Source: CME

At the same time, the CME FedWatch tool indicates a more than 30% chance for a 100bp rate hike as the FOMC struggles to curb inflation, and it remains to be seen whether Chairman Jerome Powell & Co. Will show you the quickest way. Rates as the central bank to update the Summary of Economic Estimates (SEP).

Until then, EUR/USD may continue to track a negative slope in the 50-day SMA (1.0107) as it struggles to hold above the moving average, while the upside in retail sentiment looks set to continue as traders are net-long. The pair for most of 2022.

IG Client Sentiment Report Shows that 63.08% of traders are currently net-long EUR/USD, with a ratio of traders long standing short to 1.71 to 1.

The number of net-long traders is 7.12% higher than yesterday and 24.01% lower than last week, while the number of net-short traders is 16.12% lower than yesterday and 18.85% higher than last week. A decline in net-long interest has helped ease overbought behavior as 64.81% of traders were net-long EUR/USD last week, while net-short positions increase when the exchange rate moves higher and lower. Snaps the chain. Done since last week.

Simultaneously, the EUR/USD may face another decline ahead of the Fed rate decision and amid expectations of a 75bp rate hike, and the exchange rate may continue to rebound from an annual low (0.9864) as it tracks seems to do. Negative slope at the 50-day SMA (1.0107).

EUR/USD Rate Daily Chart

Source: trading view

• EUR/USD trades back below the 50-day SMA (1.0107) after a failed attempt to test the 1.0220 (161.8% expansion) area, and the exchange rate may be tracking a negative slope in the moving average, which is the price from the previous largely reflects the action. month.
• Failure to defend the 1.0070 (161.8% expansion) area puts the Fibonacci overlap back on the radar at 0.9950 (50% expansion) around 0.9910 (78.6% retracement), a move below the annual low (0.9864). Runs increase. at the December 2002 low (0.9859).
• The next area of ​​interest comes around the October 2002 low (0.9685), but lacking momentum to break/close below the overlap of 0.9910 (78.6% retracement) to 0.9950 (50% expansion) EUR/USD within monthly range can keep.

— Written by David Song, Currency Strategist

Follow me on Twitter @DavidJSong