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EUR/USD Price Outlook – A Fresh 30-Month High May Prove Difficult

EUR/USD Price, News and Analysis:

  • The ECB is seemingly unconcerned about the Euro’s current s/t strength.
  • Will speculators test the EUR/USD 1.2000 level again?

DailyFX Economic Data and Events Calendar

Thursday’s ECB policy meeting and press conference saw the central bank marginally upgrade growth expectations and row back on any meaningful attempt to dampen the value of the Euro. President Christine Lagarde said that while the exchange rate was discussed, the ECB would only ‘monitor carefully’ any further moves. Expectations going into the meeting were for the central bank to take a stronger approach to any further Euro appreciation after August’s core inflation fell to 0.4% y/y from 1.2% while the annual headline rate turned negative in August, -0.2% from +0.4% in July. A stronger Euro keeps downward pressure on Eurozone inflation as imports become cheaper and exports more expensive.

Several ECB members are speaking today and their commentary should be closely followed. ECB chief economist Philip Lane has already hit the newswires warning that there is ‘no room for complacency’ as ‘inflation remains far below aim’.

EUR/USD touched and bounced back of the 50-day simple moving average on Wednesday, the first time this indicator has been threatened since late-May. The recent series of higher highs looks set to be broken, unless the pair trade above 1.2012, and any dovish ECB commentary or US dollar strength could see the 50-dma, currently at 1.1772, challenged again.

EUR/USD Daily Price Chart (January – September 11, 2020)

EUR/USD Price Outlook - A Fresh 30-Month High May Prove Difficult

Change in Longs Shorts OI
Daily11%-3%2%
Weekly-4%4%1%

IG Retail trader data shows 41.95% of traders are net-long with the ratio of traders short to long at 1.38 to 1.The number of traders net-long is 11.00% lower than yesterday and 11.99% lower from last week, while the number of traders net-short is 4.55% lower than yesterday and 7.94% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bullish contrarian trading bias

What is your view on EUR/USD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.