EURUSD At Key Level Ahead of US Inflation
EUR Holding on for Now
EURUSD continues to stabilise today following the heavy selling we saw on Friday in response to the stronger-than-forecast May NFP release. Headline US jobs jumped to 172k up from 112k prior (which was revised up to 172k), well above the 85k the market was looking for. Fed rate hike pricing jumped accordingly on the back of the data with a rate hike by year end now priced at more than 70%, up from around 50% prior to the release. Despite hawkish ECB expectations, the more recent (and now aggressive) shift in traders’ Fed outlook is helping drive fresh upside in USD and the pair is now vulnerable to a deeper move lower if we see any further endorsement of the hawkish Fed outlook.
US Inflation Due
Looking ahead today, focus will be on the latest US inflation figures, due this afternoon. The market is looking for headline annualised CPI to jump to 4.2% from 3.8% prior which, if seen, should see rate hike pricing rising further, lifting USD accordingly. As such, if we do see a jump in line with forecasts today, or an upside surprise, EURUSD looks likely to test below the 1.1490 support as USD makes a fresh push higher. Focus will then turn to the ECB on Thursday where EUR bulls will be looking for firm hawkishness from the bank to help revive the pair. If US CPI undershoots forecasts today, however, this could help fuel some USD long-covering into the ECB meeting, giving EUR bulls a better footing into the end of the week.
Technical Views
EURUSD
The sell off has seen price breaking down sharply below the 1.16 level with price now stalled at the 1.1490-level support and bull trend line off last year’s lows. Momentum studies are bearish and if we break lower here, 1.404 is the next support to watch while bulls need to get back above 1.16 to alleviate near-term downside risks.
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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.