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EURUSD rollback threatens recent gains

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EUR / USD analysis

  • PMI relief in the eurozone, despite disappointing figures
  • On the eve of Wednesday is full of speeches / speeches of ECB members FOMC minutes
  • EUR / USD major technical levels updated

Later the weakening of the Euro PMI and a number of ECB speakers

Yesterday’s eurozone PMI data was a potential stumbling block for euro after the currency has put in decent force against the dollar. PMI production and services were expected to be lower than the April figure, and this was not unexpected. On the contrary, the data of the British Composite PMI decreased by 4th the largest increase (6.4 points) since the beginning of the index; with services that make the greatest contribution to deteriorating economic prospects. Remaining in the UK, Flash data for May has witnessed the fastest growth in operating costs since the beginning of this index, which led to the slowest growth in business activity since the resumption of the global pandemic.

This morning we have already seen ECBPanetta and ECB President Christine Lagarde when she and Klaas Knott attend various sessions during the World Economic Forums in Davos. Elsewhere we will hear from the convinced hawk Robert Holtzman, the pigeon Pablo Hernandez de Kos and finally the ECB chief economist Philippe Lane.

Major risks ahead: FOMC protocols

Looking ahead, we have orders for durable goods in the U.S. before Brainard of the Fed comes forward. However, basic evidence of high exposure points to FOMC minutes to come out tonight. Markets will be interested in assessing the seriousness of the 75-point increase and the general mood for future austerity measures, along with a discussion of quantitative austerity measures.

Key technical levels EUR / USD

The euro has been rising cautiously since May 12th the bottom is mostly due to the softer US dollar as U.S. companies failed to meet profit targets while warning of deteriorating consumer trends that were witnessed. Walmart and Target saw their stock prices fall after disappointing results and reported a shift in consumer trends toward cheaper alternatives. The topic of declining future earnings reflects some of the challenges facing U.S. firms as the Fed remains on track to aggressively raise rates by the end of the year.

However, today EUR /USD returned to the 2020 low of 1.0635. the 1.0635 level represents the first challenge of a long-term bearish trend that will largely depend on future dollar price action. A break below 1.0635 highlights the upper part of the large zone 1.0310 – 1.0450 (values ​​see monthly chart).

Resistance is at 1.07575 and 1.0805, which are still far away. EUR / USD bulls will look for a possible rebound from 1.0635 if the long-term bullish reversal remains constructive.

Rate markets have created an expectation that the ECB will raise a total of 100 basis points in 2022, with cancellations often proposed to occur in July following the completion of asset purchases. In my opinion, most of the delay in the EUR / USD exchange rate coincided with the general relief we saw in world markets when the dollar showed signs of fatigue at higher levels. In the absence of a long-term reversal of the trend, EUR / USD seems vulnerable to continued bearish movement.

Daily EUR / USD chart

Source: TradingView, prepared Richard Snow

The monthly chart shows the support area that halted the previous decline in EUR / USD and thus remains an important area of ​​focus when analyzing the potential bearish continuation below 1.0300.

Monthly chart EUR / USD

EUR / USD outlook: EURUSD rollback threatens recent growth

Source: TradingView, prepared Richard Snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX

https://www.dailyfx.com/forex/market_alert/2022/05/25/New_document_1EURUSD-Outlook-EURUSD-Pullback-Threatens-Recent-Gains-RS.html

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