EUR/USD – Talking Points
- EUR/USD recovers after briefly falling back below 1.07
- ECB now priced for 33 basis points of tightening in June
- Fed’s Waller hints that September pause may not be on the table
The Euro continues to gain against the Dollar as EUR/USD recovers from an overnight dip below 1.07. In a volatile session, the Euro fell as low as 1.0679 as higher US Treasury yields buoyed the US Dollar during the European trading session. Following the opening bell in New York, EUR/USD recovered sharply from session lows before losing steam around 1.0730.
Monday’s session saw EUR/USD close above the 50-day moving average, but those gains have since been given back with American traders back online.
The Euro has benefited tremendously of late from recent headlines out of the ECB, as policymakers look set to move away from negative interest rates while inflation rages across the continent. At the same time, comments from Atlanta Fed President Raphael Bostic opened the door to a potential pause from the FOMC at the September policy meeting.
On Monday, Christopher Waller revealed that he plans to keep 50 basis point hikes on the table for “several meetings,” until inflation shows signs of moderating. With Bostic being a non-voting member and Waller being a voting member of the FOMC, the volatility during Tuesday’s session could be a sign that the market had initially put too much stock in Bostic’s comments.
EURUSD 4 Hour Chart
Chart created with TradingView
Despite trading lower throughout the APAC and European sessions, the EUR/USD slide failed to sustain bearish momentum below key the April 25 low at 1.0695. For upside continuation, EUR/USD would need to make a break through the 1.0785 barrier which now sits as near-term resistance. As we inch closer to the upcoming June ECB meeting, EUR/USD may benefit from traders betting on a 50 basis point hike from European policymakers. The 50-day moving average at 1.0737 may also offer support for any moves higher. Should this countertrend move reverse, 1.0650 may serve as an initial downside target.
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— Written by Brendan Fagan, Intern
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