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Aug 26 - 01:55 PM

EUR/USD - COMMENT-Powell Out Flexes ECB, Spotlighting EUR/USD Downside Risks

By Christopher Romano  —  Aug 26 - 11:45 AM

EUR/USD held onto modest gains on Friday inspired by hawkish ECB talk and soft U.S. data but it retreated well off its highs with Fed rhetoric out of Jackson Hole reinforcing the host of downside risks confronting the euro.

EUR/USD spiked up to 1.0090 on EBS after U.S. data indicated inflation moderated further nL1N3020ZSnAQN1NTYTX and a Reuters ECB sources story nL4N3014BB said policymakers want to discuss a 75bp hike in September.

EUR/USD bulls were sent scurrying, however, after Fed Chair Powell said tight monetary policy will be needed for some time before inflation is under control and that growth and employment will weaken nL1N3021HT.

The dollar and U.S. rates US2YT=RR rallied sharply, driving growth-sensitive assets such as equities ESv1 and commodities LCOc1 lower.

The euro zone is highly correlated with global growth, helping EUR/USD erase the ECB-induced gains and fall below parity.

Price action reinforced already bearish techs, with a daily inverted hammer forming, monthly RSI falling and EUR/USD falling back below the 10-DMA.

Trend-line support off the Aug.
23 daily low is under threat and a break would target 0.9900 and then the December 2022 monthly low at 0.9860.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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