The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.
Euro edges higher
After a difficult week for EUR/USD it seems to have found stability in the $1.05 region, but tommorow's eurozone inflation report and Wednesday's Fed meeting will play a major role in the currency pair’s direction over the next month. The final reading of CPI in the eurozone tomorrow is expected to come in at -0.3%. It was deflation in the first place that brought about the quantitative easing scheme from the European Central Bank, and the report will keep pressure on the single currency.
The euro’s recent downfall is only partially related to the European Central Bank’s easing, and the possibility of an interest rate rise from the US is a large component of the move. The market is focused on the language of the Fed, and in particular whether the word ‘patience’ is included or excluded from the statement. The market is penciling in a rate rise in June, and hawkish commentary on Wednesday will put parity on the map.
On a daily basis EUR/USD is oversold and a correction is likely. The 50-hour moving average at $1.0570 will be the initial target and a move above that will bring $1.06 into play. If that level is cleared the resistance at $1.0640 will be brought into sight. The $1.05 level is acting as support and if it is cleared it will bring the support at $1.0470 into play. Beyond that traders will look to $1.04.