Fed speak to dominate today’s scheduled event risks (Williams, Waller)EUR/USD drifts lower in search of a catalystEUR/GBP eyes support ahead of UK CPI printThe analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library
It’s a rather quiet day on the economic calendar in what is a rather quiet week. In fact, apart from Euro PMI data on Thursday, things remain quiet until the last few days of the month when we get US PCE and EU inflation data.
Thus far, Fed speakers have continued to distance themselves from interest rate cuts, promoting the idea that interest rates will likely need to remain elevated for some time to get inflation moving back towards the 2% target.
In the afternoon, we will hear from Fed Governor Christopher Waller and New York Fed President John Williams. Williams previously hinted in April that the Fed may have to hike interest rates if inflation continued to show a lack of progress. Since the lower April CPI, the idea of a potential hike has evaporated and the focus shifts to when the most appropriate time would be to cut rates towards the latter months of the year.
Customize and filter live economic data via our DailyFX economic calendar
EUR/USD trades in somewhat of a tepid fashion but has a slight lean to the downside after bouncing off channel resistance. There was always a good chance that the dollar would recover some of its losses in a quieter week as the FX market tends to favour higher yielding currencies under less volatile conditions.
The pair approached overbought conditions but reversed course before actually breaching the marker. The last time this was observed was back in March when an extended period of selling ensued. Resistance remains at the upper limit of the ascending channel while support rests at the channel support, followed by the psychological level of 1.0800 and the 200 day simple moving average thereafter.
EUR/USD trading seeks a catalyst that may only arrive towards the latter stages of next week when US PCE as well as German and EU inflation data is due.
EUR/USD Daily Chart
EUR/USD Mixed Data provided by of clients are net long. of clients are net short.
Change in | Longs | Shorts | OI |
Daily | 14% | 0% | 5% |
Weekly | -9% | 7% | 0% |
Recommended by Richard Snow How to Trade EUR/USD EUR/GBP Eyes Support Ahead of UK CPI Print
EUR/GBP initially began the year in a fairly well-defined trading range but showed bullish impetus after breaking out of the consolidation pattern. However, bullish momentum appeared lacking, as the pair struggled to maintain a steady directional move and has since shown a penchant towards mean reversion.
0.8635 proved too high to handle for the pair previously but the most recent bullish advance fell short of that, finding resistance around the 200-day simple moving average (SMA) before heading lower.
The current spate of selling is showing signs of fatigue as the pair attempts to trade higher after four successive days of losses. The pair could find itself propped up by trendline support, which caught the bottoms in April and earlier on in May.
Keep an eye out for UK CPI tomorrow where there is an expectation of a notable move lower from the prior month. With such optimism, comes the potential for disappointment if the actual data fails to reach the low levels anticipated which may see sterling lift in the moments after the print. April data has the potential to surprise to the upside as this is the month when annual price rises and index-linked increases are implemented. On the other side of the equation, if the CPI data prints inline or lower than consensus estimates, EUR/GBP may rise off support as markets clear the way for a Bank of England cut sooner rather than later.
EUR/GBP Daily Chart
EUR/GBP Bearish Data provided by of clients are net long. of clients are net short.
Change in | Longs | Shorts | OI |
Daily | 5% | -6% | 1% |
Weekly | 36% | -33% | 0% |
Recommended by Richard Snow The Fundamentals of Range Trading