Euro, EUR/USD, US Dollar, Fed, ECB, China PMI, AUD/USD. Crude Oil – Talking Points
- Euro support eased as markets look toward rate changes this week.
- A strong Chinese PMI wasn’t enough to overcome weak local data for the Aussie
- The Fed, ECB and BoE are in the box seat this week. Where will EUR/USD end up?
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The Euro is steady going into the European session today and is looking to notch up a fourth straight monthly gain after making a 20-year low last September.
The US Dollar losing ground across the board has aided the rally thanks to perceptions that the Federal Reserve might be less aggressive in its tightening regime.
The move up for EUR/USD has also received some tailwinds from the European Central Bank (ECB) stepping up its fight against inflation.
Tomorrow the Fed will be fine-tuning its stance, followed by the ECB on Thursday. Markets are anticipating a hike of 25 basis points(bp) and 50 bp respectively.
Markets in general appear to be bracing for these key events with APAC equities having a quiet Tuesday after a stellar January performance to the topside.
Wall Street finished its session lower, with the Nasdaq down 1.96%. Futures are pointing to a soft start to their cash session later.
Currency markets are relatively subdued with the exception of the Aussie Dollar. It slid lower after disappointing domestic retail sales and credit data. The move also dragged the Kiwi Dollar down.
A strong Chinese PMI number for January revealed the uptick in sentiment after the Communist party unshackled the economy from Covid-19 restrictions at the end of last year.
The manufacturing PMI for January was in line with forecasts at 50.1 and the non-manufacturing read came in at 54.4, notably above the 52.0 anticipated. This combined to give a composite PMI read of 52.9 against 42.6 previously.
Treasury yields have held onto overnight gains with the benchmark 10-year note back 3.50%
Elsewhere, the Adani saga continues to play out as the conglomerates’ rebuke of criticism is yet to allay markets. The company has lost around US$ 70 billion of market capitalisation since an active investor, Hindenburg Research, listed a series of concerns.
Crude oil continues to sink to 2-week lows on worries of the tightening coming from central banks this week. The WTI futures contract is under US$ 78 bbl while the Brent contract is below US$ 85 bbl. Gold is fairly steady near US$ 1,920.
A series of inflation, jobs and growth data across Europe is due out today.
The full economic calendar can be viewed here.
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EUR/USD TECHNICAL ANALYSIS
EUR/USD made a 9-month high this month at 1.0927 which was just shy of the historical resistance levels at 1.0936 and 1.0945 which are a breakpoint and prior peak respectively. These levels may continue to offer resistance.
The price is almost all period simple moving averages (SMA) with except for the 10-day SMA. A recovery back above it may see bullish momentum evolve.
On the downside, support could be at the previous lows and breakpoints of 1.0787, 1.0774, 1.0766 and 1.0736.
— Written by Daniel McCarthy, Strategist for DailyFX.com
Please contact Daniel via @DanMcCathyFX on Twitter