EUR/USD Price, Chart, and Analysis
The Federal Reserve should hike interest rates to 3.5%, as soon as it is expedient, to get inflation under control, according to one FOMC member. St. Louis Fed’s James Bullard, a known hawk, said the neutral interest rate should be 3.50%, suggesting another 300 basis points of rate hikes, possibly all this year. Mr. Bullard also said that while it wasn’t his base case, a rate hike of 75 basis points should not be ruled out. There is now a real possibility of 50 basis point rate hikes at all of the remaining six FOMC meetings this year.
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The Euro remains under pressure and is now back below 1.0800. A slowdown in growth across the single-block – lookout for the latest IMF growth outlooks released later today – leaves the ECB with little room to fight persistently high inflation. While other major central banks are actively raising interest rates, the ECB is not expected to move until the end of Q3 at the earliest. The widening interest rate differentials between the US dollar and Euro will continue to press down on EUR/USD.
The weekly EUR/USD chart shows how the pair have given back nearly all of the January 2017 – February 2018 rally and look set to move lower. Support from a double low in March 2020 at 1.0636 is the next logical level of support and this guards a cluster of weekly lows seen in late 2016 to early 2017. This zone will take a sustained sell-off to break and will likely hold.
EUR/USD Weekly Price Chart – April 19, 2022
Retail trader data show 75.60% of traders are net-long with the ratio of traders long to short at 3.10 to 1. The number of traders net-long is 4.97% higher than yesterday and 3.06% higher from last week, while the number of traders net-short is 3.78% lower than yesterday and 4.16% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD-bearish contrarian trading bias.
What is your view on the EURO – 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.