EUR/USD Soars as Greenback Loses Sparkle Forward of US Inflation Report

EUR/USD Soars as Greenback Loses Sparkle Forward of US Inflation Report

Table of Contents


  • EUR/USD jumps on hawkish ECB commentary and risk-on temper in world markets
  • The pair exams channel resistance, however fails to interrupt above it decisively
  • All eyes will likely be on the U.S. inflation report on Tuesday

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Most Learn: How Record Inflation Will Impact the US Midterm Elections

The euro strengthened towards the U.S. dollar for a second straight day on Monday, rising as a lot as 1.6% to 1.0198 within the in a single day session earlier than paring some positive aspects to settle round 1.0135 in early afternoon buying and selling, supported primarily by hawkish feedback from European Central Financial institution officers and the risk-on temper in world markets, mirrored within the strong rally in both European and U.S. stocks.

In an interview over the weekend, Bundesbank President Joachim Nagel stated that policymakers should take “additional clear steps” if the inflation profile doesn’t enhance, an indication that the ECB may proceed to front-load coverage changes at its October assembly, probably matching the unprecedented 75 foundation factors hike delivered final Thursday.

The bullish sentiment on Wall Street additionally appeared to learn high-beta currencies, hurting safer plays such as the greenback. The U.S. greenback has been overbought in current weeks, with the DXY index hitting multi-decade highs earlier this month, so some profit-taking is pure, particularly forward of key U.S. financial information that will alter the prevalent narrative amongst FX merchants.

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The U.S. Bureau of Labor Statistics will launch its newest client value index survey on Tuesday morning (check out the DailyFX Economic Calendar). Headline CPI for August is forecast to say no 0.1% month-over-month, bringing the annual charge to eight.1% from 8.5%, the bottom studying since February. With prices for energy, used automobiles, motels, attire and transportation all in retreat, the official figures may simply come beneath expectations.

Whereas a draw back shock within the numbers may not change the result of the September FOMC assembly, it may trigger merchants to start out discounting a shallower tightening path and even resurrect the “dovish pivot” principle for subsequent yr. This state of affairs may weigh on U.S. Treasury yields, at the very least within the brief time period, till we hear from the Fed once more. The EUR/USD may reap the benefits of this example, extending its rebound within the coming days, though its long-term outlook stays bleak amid growing recession risks in the Eurozone.

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily -3% 14% 4%
Weekly -28% 26% -11%


EUR/USD jumped and attacked channel resistance near 1.0200 firstly of the week, however was unable to breach this barrier, with costs retrenching barely decrease from these ranges on the time of this writing. For upward momentum to speed up, the pair should clear this hurdle decisively within the coming days, a scenario that would appeal to new patrons and pave the best way for a transfer in direction of 1.0370.

On the flip aspect, if sellers resurface and spark a bearish reversal, preliminary assist seems at 1.0090, adopted by the 2022 lows barely beneath the 0.9875 space.


EUR/USD Chart Prepared Using TradingView


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—Written by Diego Colman, Market Strategist for DailyFX

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