EURO FUNDAMENTAL BACKDROP
This morning, the euro’s gains from yesterday have been reduced as the US dollar experiences a recovery. While the US Consumer Price Index falls in line with projections and indicates nearly three rate cuts by year-end according to money market pricing, risk sentiment is deteriorating due to a lack of assurance in US debt ceiling discussions. As a result, the US dollar’s safe haven appeal has gained support against the euro and may serve as a foundation for EUR/USD until a resolution is reached.
Today’s economic calendar for the eurozone is relatively light, with attention focused on the European Central Bank (ECB) officials. It is anticipated that the ECB’s Schnabel will provide hawkish commentary, although yesterday’s ECB guidance did not result in any significant follow-through. The European session began with Nagel from the ECB citing persistent inflation and advocating for extended periods of higher interest rates; however, this sentiment has not yet been translated into action.
The Chinese Consumer Price Index and Producer Price Index did not meet expectations in the Asian trading session, leading to a decrease in risk appetite. The euro was negatively affected due to apprehensions regarding China’s economic expansion and domestic consumption, further aggravating risk aversion stemming from the US debt ceiling issue.
Later today, the US Producer Price Index (PPI) and jobless claims data will be the center of attention, as indicated in the economic calendar below. Additionally, FOMC members Waller and Kashkari will also be closely monitored.
EUR/USD DAILY CHART
The current daily price fluctuations of EUR/USD have breached the ascending channel (black) and if there is a daily candle close beneath this level, there may be an additional decline in the value of the euro. The possibility of this occurrence is dependent on US factors, specifically the primary debt ceiling guidance, which explains why there is hesitation reflected in the Relative Strength Index (RSI).
- 1.1096/Channel resistance
- Channel support
- 50-day moving average (yellow)
IG CLIENT SENTIMENT DATA: MIXED
According to the IGCS, the retail traders have established a long position on EUR/USD, with a majority of 51% currently holding such positions (at the time of writing). Despite our usual contrarian approach towards crowd sentiment at DailyFX, we have adopted a short-term cautious stance due to recent alterations in long and short positioning.