Euro Price Forecast: Is the EUR/USD Bear Market Rally Coming to an End?

[MongiIG]

EUR/USD TALKING POINTS

• ECB tightening remains supported.
• ECB and Fed speeches.
• U.S. Manufacturing PMI in focus.

 

EURO FUNDAMENTAL BACKDROP

The euro has enjoyed some much needed respite since mid-May after extended long positioning on the U.S. dollar faded. Yesterday’s oil embargo on Russia has now heightened fears of further downward growth revision within the euro zone despite inflation data showing no signs of relief. This has prompted money markets to price in further rate hikes (see table below) all the way through to 2023 which may be unlikely as the economic outlook for the region remains skewed to the downside.

ECB INTEREST RATE PROBABILITIES

Source: Refinitiv

A positive start for the EU in terms of economic data this morning began with its May PMI release of 54.6 which marginally exceeded expectations, maintaining an overall expansionary stance. Unemployment for April remained low printing in line with the 6.8% forecast. Looking ahead the ECB’s President Christine Lagarde is scheduled to speak (see calendar below) while markets await the much anticipated ISM Manufacturing PMI figure which has been on the decline of recent.

 

Source: DailyFX economic calendar

TECHNICAL ANALYSIS

EUR/USD DAILY CHART

Chart prepared by Warren Venketas, IG

EUR/USD price action seems to be testing the medium-term downtrend (black) which coincides with the 1.0800 psychological level as well as the RSI’s 64 level (green) which has yet to be breached in 2022.

With fundamentals favoring a likely EU growth decline (regardless of the current hawkish pressure), I think that the U.S. economy (and therefore the dollar) remains the preferred currency in my view. I will be looking for subsequent support targets unless we see a daily candle close above the 1.0800.

Resistance levels:

• 100-day EMA (yellow)
• 1.0800/trendline resistance (black)

Support levels:

• 50-day EMA (blue)
• 20-day EMA (purple)

IG CLIENT SENTIMENT DATA: BULLISH

IGCS shows retail traders are currently LONG on EUR/USD, with 57% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however, recent changes in long and short positioning result in an upside bias.

Jun 1, 2022 | DailyFX
Warren Venketas, Analyst

[PirateRadio]

Euro Zone has been influenced by external factors that became catalysts everyday; under the present circumstances EUR has a real potential moving tightly with several commodities and indices until Europe gets back on its initial path and definitions: EUR/USD: it tests the  support @ 1.0634, heads up to 1.06589 then...let's see what...METEO... says :)...200 PIPS at once (GBP/CAD, GBP/CHF)

Edited June 1, 2022 by TradingBrotherBro

[phillo]

looking at a monthly chart, you wouldn't think it would.  the "wedge has broken to the downside, however there is what some may consider previous support around here ???  .  Further downside could be into that brown rectangle ( an old order block ? ) . While the Fed are raising rates, the ECB still are unable to get past the "talking about" phase, & remember they are still doing QE !!!

[MongiIG]

18 hours ago, TradingBrotherBro said:

Euro Zone has been influenced by external factors that became catalysts everyday; under the present circumstances EUR has a real potential moving tightly with several commodities and indices until Europe gets back on its initial path and definitions: EUR/USD: it tests the  support @ 1.0634, heads up to 1.06589 then...let's see what...METEO... says :)...200 PIPS at once (GBP/CAD, GBP/CHF)

Hi @TradingBrotherBro

Thanks for sharing!

Monetary policy, prices & inflation, confidence and sentiment, GDP and balance of payments are the external factors you are referring to that have an influence on the Euro ?

Thanks

MongiIG

[MongiIG]

18 hours ago, phillo said:

While the Fed are raising rates, the ECB still are unable to get past the "talking about" phase, & remember they are still doing QE !!!

According to Danske Bank Research Team, ECB slows QE. ECB will scale back its net APP purchases to EUR20bn for June, and Fed will commence its QT phase. ECB and the EU are set to publish assessments of Croatia's bid to join the euro next year.

The 60 second overview: Euro area inflation for May

 

All the best

MongiIG

[PirateRadio]

20 hours ago, MongiIG said:

Hi @MongiIG,

It was a simple speculation, not a financial advice or forecasting the trend, as far as I know Economic Calendar revises the events and economic records and on very rare occasions brings in the present facts forecasting the day of announcements in charts which randomly can be discovered in the past, the investment decisions may or may not be right until next announcements , as investor and trader I try my best to stay focused on charts, while others on volume, it is worthy challenging own brains in a personal manner, instead of being influenced by others' activity and jobs :).

Thank you   

 

[MongiIG]

On 01/06/2022 at 20:06, RomPathsSwap said:

Euro Zone has been influenced by external factors

 

All the best - MongiIG