Jump to content

EUR/USD Eyes 2021 Low Ahead of Fed Meeting as ECB Defends Dovish Guidance


Recommended Posts

EUR/USD RATE TALKING POINTS

EUR/USD extends the series of lower highs and lows from the previous week as European Central Bank (ECB) officials defend the dovish forward guidance for monetary policy, and the exchange rate appears to be on track to test the yearly low (1.1664) following failed attempt to clear the July high (1.1909).

EUR/USD dropped by nearly 1.10-Industry Global News24

 

EUR/USD EYES 2021 LOW AHEAD OF FED MEETING AS ECB DEFENDS DOVISH GUIDANCE

EUR/USD is on pace to mark a three day losing streak for the second time this month as the ECB tames speculation for a shift in monetary policy, with Governing Council Isabel Schnabel pledging to “act more patiently” as the central bank struggles to achieve its one and only mandate for price stability.

In a recent speech, Schnabel insists that the ECB needs “to see clearer signs that inflation is reliably moving towards our 2% target” before the central bank switches gears as “inflation is still expected to be below our 2% target in the medium term.” As a result, Schnabel argues that the non-standard tools “will remain crucial in the time to come, paving the way out of the pandemic and towards reaching our inflation target,” and the comments suggest the ECB is in no rush to normalize monetary policy “given the remaining uncertainty regarding the pandemic and the economic and inflation outlook.”

In turn, EUR/USD may remain under pressure ahead of the Federal Reserve interest rate decision on September 22 as Chairman Jerome Powell and Co. appear to be on track to deliver an exit strategy, but a further decline in the exchange rate may fuel the recent flip in retail sentiment like the behavior seen earlier this year.

Image of IG Client Sentiment for EUR/USD rate

The IG Client Sentiment report shows 61.27% of traders are currently net-long EUR/USD, with the ratio of traders long to short standing at 1.58 to 1.

The number of traders net-long is 6.63% higher than yesterday and 21.45% higher from last week, while the number of traders net-short is 12.85% higher than yesterday and 24.98% lower from last week. The rise in net-long interest has fueled the flip in retail sentiment as 50.70% of traders were net-long EUR/USD last week, while the decline in net-short position could be a function of profit-taking behavior as the exchange rate extends the series of lower highs and lows from last week.

With that said, the rebound from the August low (1.1664) may turn out to be a correction in the broader trend as the exchange rate trades to fresh yearly lows in the second half of 2021, and the Federal Open Market Committee (FOMC) rate decision may the exchange rate under pressure if the central bank starts to taper its purchases of Treasury securities and mortgage backed securities (MBS).

 

EUR/USD RATE DAILY CHART

Image of EUR/USD rate daily chart

Source: Trading View

  • Keep in mind, EUR/USD sits below the 200-Day SMA (1.1987) for the first time since April as the advance from the March low (1.1704) failed to produce a test of the January high (1.2350), with the exchange rate trading to a fresh yearly low (1.1664) in August as the 50-Day SMA (1.1791) established a negative slope.
  • As a result, the advance from the August low (1.1664) may continue to unravel following the failed attempt to clear the July high (1.1909), but need a break/close below the Fibonacci overlap around 1.1670 (78.6% expansion) to 1.1710 (61.8% retracement) to open up the 1.1670 (78.6% expansion) to 1.1680 (50% retracement) region.
  • A break of the August low (1.1664) brings the 1.1640 (50% expansion) region on the radar, with the next area of interest coming around 1.1580 (61.8% expansion).

Written by David Song, Currency Strategist, 20 September 2021. DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,281
    • Total Posts
      90,910
    • Total Members
      41,398
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Mapiknot
    Joined 06/02/23 21:35
  • Posts

    • Stock Market Investing S&P/ASX 200 Elliott Wave Technical  Analysis Content ASX200, CBA, IRON ORE, BHP, RIO, FMG,GOLD, NCM, GDX, PLS, LTR, DXY, AUDUSD, GOV-BONDS Summary Strong USD Turns resources lower. Banks still edging higher, creating choppy ASX200 possible top... Elliott Wave ASX 200  Wave (1) top Strategy ASX200  Very choppy environment. No Strategy. Video Chapters 00:00  S&P/ASX 200 (XJO)  / USD DXY 11:36 Commonwealth Bank CBA, XXJ 13:00 BHP Group (BHP), Rio Tinto (RIO), Fortescue Metals Group (FMG) 18:32 Newcrest Mining NCM / GOLD XAUUSD GDX 27:50 Lithium Stocks,PLS 30:52 AUDUSD / US Dollar DXY 36:46 TRIAL Buy 1 Month Get 3 Months Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge com  
    • Look Ahead to 07/02/23: RBA; GB Retail Sales; BP, BNPP earnings Australia’s central bank is likely to deliver a fourth consecutive quarter-point interest rate hike, after further tightening by the Fed, the ECB and the BoE. Brace for UK retail, earnings from BP (BP) and BNP Paribas (BNPP). Also, look out for US trade balance figures and Halifax house price data ahead of key UK growth data out later in the week.    Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 06 February 2023        
    • Hi, I am practicing certain strategies in demo account. I have created few screeners but when i tried to buy or short sell different stocks shortlisted based on screener conditions, i am getting different kinds of errors. Some stocks you can buy but can't short-sell and so on. I searched in the forums and i understand different restrictions such as market cap should be so and so. Are these rules defined somewhere?  for e.g. one forum reply says market cap should be above 10 billion otherwise you will get second message in below list. However even i try to short sell a stock that has £30 billion market cap, i get the same error.  1. IG is not accepting opening trades on this market, you may only place an order to close. 2. Market you have requested is not longer available online Any suggestions on the above will be greatly appreciated. Thank you.
×
×
  • Create New...