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Apr 16 - 10:55 PM

EUR/USD - COMMENT-EUR/USD Bowed Not Broken - U.S. Inflation Is Key

By John Noonan  —  Apr 16 - 08:35 PM

EUR/USD fell on Friday, but technical damage was limited and the trend higher remains intact.
Key for EUR/USD bulls is the persistence of U.S. inflation and the U.S. Federal Reserve's response.

Expectations for the path of the Fed's tightening cycle have swung back and forth, dictated by U.S. data and which Fed speaker takes centre-stage.

There was a hawkish turn in Fed expectations Friday when Fed Governor Christopher Waller said higher rates were needed, and short-term inflation expectations in the University of Michigan survey rose to 4.6% from 3.6%.

Expectations for a 25 basis-point hike in May to 5.00-5.25% firmed to 78%, according to CME Fedwatch, up from around 70% a week ago.
But the market pricing continues to suggest that will be a peak, and there is more than an 80% chance rates will be cut by November.

Unless you believe market pricing is underestimating inflation pressures and the Fed has a lot more tightening to do, the dip in the EUR/USD provides a buying opportunity.

The technical outlook for the EUR/USD remains bullish, with the five, 10 and 21-day moving averages in a positive alignment.
Friday's dip held above the 10-day moving average, which comes in at 1.0947.
As long as EUR/USD continues to close above that reading, the uptrend remains in place.
The objective of the trend in the 61.8% Fibonacci retracement of the 2020-2022 drop at 1.1271.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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