Jump to content

Euro Forecast: EUR/USD Rate Turns to US PCE after Lowest Close Since June 2020


Recommended Posts

EURO, EUR/USD, US DOLLAR, FED, PCE DATA – TECHNICAL OUTLOOK

  • EUR/USD closed at its lowest since June 2020 on Thursday
  • This follows a hawkish Fed rate decision, boosting the USD
  • Euro eyeing US PCE data, will it inspire further weakness?
Euro / Dollar Seen On Road to Recovery Next Year in Latest Barclays  Forecasts

WILL EURO’S DOWNTREND ACCELERATE?

The Euro extended losses against the US Dollar over the past 24 hours, with EUR/USD closing at its lowest since June 2020. The single currency has been under pressure aggressive selling pressure after this week’s Federal Reserve interest rate decision. There, Chair Jerome Powell confirmed expectations for a hike and wrapping up asset purchases under quantitative easing in March.

He also did not shy away from upholding a hawkish view, saying that “there is quite a bit of room to raise interest rates without threatening the labor market”. The United States unemployment rate sits at 3.9%, fast approaching pre-pandemic levels. However, the labor force participation rate remains far off from where it was before Covid.

Taking a look at the chart below, EUR/USD can be seen inversely tracking December 2022 Fed rate hike expectations. The latter is derived from Fed Funds Futures, showing that 4 rate hikes are fully priced in. On top of this, there are rising calls for a fifth hike by the end of this year. Quantitative tightening, or unwinding of the balance sheet, is also expected to start soon after the first rate increase.

With that in mind, EUR/USD will be closely eyeing US PCE data over the next 24 hours. This is the Fed’s preferred gauge of inflation, and the core deflator is expected to cross the wires at 4.8% y/y, up from 4.7% prior. If the December CPI report is to offer any prelude, a mostly in-line outcome may even offer breathing space for risk appetite, especially given how hawkish Fed policy bets are. Still, a stronger print risks amplifying market volatility and boosting demand for the haven-linked US Dollar.

EURO VERSUS 2022 FED RATE HIKE PROJECTIONS

Euro Forecast: EUR/USD Rate Turns to US PCE after Lowest Close Since June 2020

Chart Created in TradingView

EUR/USD TECHNICAL ANALYSIS – DAILY CHART

EUR/USD closed under the key 1.1169 – 1195 support zone that was established in late November. This followed a turn lower on key falling resistance from May. That has exposed the 78.6% and 100% Fibonacci extension levels at 1.1085 and 1.0977 respectively. Still, taking a look at RSI reveals positive divergence, a sign of fading downside momentum. This can at times precede a turn higher. Closing back above the former support zone may open the door to retesting the falling trendline. The latter could then reinstate the dominant downtrend.

 

 

Written by Daniel Dubrovsky, Strategist for DailyFX.com. 28th Jan 2022

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
      23,043
    • Total Posts
      95,434
    • Total Members
      43,656
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Turtlebot
    Joined 30/09/23 13:08
  • Posts

    • The crypto market appears to be showing signs of recovery, with significant improvements in the Sharpe Ratios of Bitcoin, BGB, and Ethereum, according to an article published on Friday.  The Sharpe Ratio, a measure used to understand the return of an investment compared to its risk, has seen a notable increase for both cryptocurrencies. Bitcoin's Sharpe Ratio has risen from -2.4 to 0.68, while Ethereum and BGB have also experienced a similar uptrend. This change signifies higher returns at lower risk, which is expected to attract more investors to the crypto market. In addition to the improved Sharpe Ratios, increased network activity and trading volume as shown on CEXs like Bitget, Binance, and a few DEXs are suggesting a healthier market state. The current trading prices of Bitcoin, reflect this overall positive market sentiment. As of Friday, Bitcoin was trading at $27,069.73, BGB at $0.454 and Ethereum at $1,677.89. These developments are significant as they indicate reduced risk in the crypto market. The increase in the Sharpe Ratios for Bitcoin, BGB, and Ethereum suggests that these cryptocurrencies are becoming less risky investments, which could potentially lead to an influx of new investors into the market.  Could this rise in Sharpe Ratios coupled with increased network activity and trading volume point towards a recovering and less risky crypto market?
    • Hi, That's great, thank you very much. Very helpful! Many thanks.
    • Texas Instruments Inc., Elliott Wave Technical Analysis Texas Instruments Inc., (TXN:NASDAQ): Daily Chart, 29 September 23 TXN Stock Market Analysis: We have been moving lower as expected from the previous forecast. Looking for continuation lower as there is an incomplete bullish sequence. Looking for extension lower in wave {iii}. Downside target stands below wave (W). TXN Elliott Wave Count: Wave {iii} of C. TXN Technical Indicators: Below al averages.   TXN Trading Strategy: Looking for shorts on the way down.   TradingLounge Analyst: Alessio Barretta Source : Tradinglounge.com get trial here!       Texas Instruments Inc., TXN: 4-hour Chart, 29 September 23 Texas Instruments Inc., Elliott Wave Technical Analysis TXN Stock Market Analysis: As we are getting an overlapping structure in what could be a wave {iii} there is a high chance we will see an acceleration lower to then see a series of fours and fives.   TXN Elliott Wave count:  Wave (iii) of {iii}. TXN Technical Indicators: 20EMA as resistance. TXN Trading Strategy: Looking for shorts on the way down.
×
×
  • Create New...
us