EUR/USD Rate Talking Points

EUR/USD threatens the opening range for August as it trades towards a new weekly low (1.0122), and the exchange rate may follow the negative slope of the 50-day SMA (1, 0294) as it continues to retreat from the former support area around May low (1.0349).

EUR/USD will follow the 50-day SMA after testing the former support zone

Recent price action raises the possibility of further declines in EUR/USD as it extends last week’s series of lower highs and lower lows, and the exchange rate may struggle to hold onto the rally in the annual low (0.9952) while the former support area around May low (1.0349) now acts as a resistor.

Looking ahead, it remains to be seen whether the Federal Open Market Committee (FOMC) minutes will influence the EUR/USD as president. Jerome Powell acknowledges that “it will likely become appropriate to slow the pace of increases as we assess how our cumulative policy adjustments affect the economy and inflationand hints of an impending Fed policy shift could create headwinds for the greenback if a growing number of officials show greater willingness to implement smaller rate hikes over the next few months. month.

As a result, EUR/USD may face range-bound conditions ahead of the FOMC’s next interest rate decision on September 21, amid falling expectations of a further rate hike from the Fed by 75 basis points, but the committee could maintain its current approach to fighting inflation, as Chairman Powell insists that “another unusually large increase may be appropriate at our next meeting.”

In turn, the resumption of yearly low (0.9952) could prove to be a correction to the broader trend, with the FOMC poised to conduct a restrictive policy, and the recent reversal in retailer sentiment appears to have been short-lived as traders went net long on the EUR/USD for most of 2022.

Image of IG client sentiment for the EUR/USD rate

The IG Customer Opinion Report shows 63.46% of traders are currently long fillet EUR/USD, with the ratio of long to short traders upright at 1.74 to 1.

The number of net long traders is 1.61% higher than yesterday and 16.42% higher than last week, while the number of net short traders is 1.82% lower than yesterday. yesterday and 19.31% lower than last week. The rise in net buying interest fueled the reversal in retailer sentiment, with 49.15% of traders net long EUR/USD last week, while the decline in net The downside comes as the exchange rate threatens the opening range for August.

That said, EUR/USD could continue to follow the negative slope in the 50-day SMA (1.0294) after answering former support area around May low (1.0349)and the exchange rate can struggling to hold on to rebound from yearly low (0.9952) as it extends the series of lower highs and lower lows carried over from last week.

Daily EUR/USD rate chart

Image of the daily EUR/USD rate chart

Source: Commercial view

  • EUR/USD threatens August opening range as former support area around May low (1.0349) now serves as resistanceand the exchange rate may largely reflect the price action of June as it struggles to hold above the 50-day SMA (1.0294).
  • In turn, EUR/USD may continue to follow the negative slope of the moving average after the failed attempt to break/close above 1.0370 area (38.2% expansion)with the movement below 1.0220 (161.8% extension) bringing the 1.0070 (161.8% expansion) area on radar.
  • The next area of ​​interest lies around 0.9910 (78.6% retracement) to 0.9950 (50% expansion), with a break below the yearly low (0.9952) opening the low of December 2002 (0.9859).

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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