FUNDAMENTAL
OVERVIEW
USD:
The US dollar remains
supported across the board amid the US-Iran war and triple digit oil prices. We
are having a pullback today after WSJ reported that Trump would be open to
end the war without pushing for a reopening of the Strait of Hormuz. That would
be great news for the markets as the Iranians will likely reopen the Strait as
soon as the US forces withdraw.
We will need Trump to
announce that though as the only thing we got till now were speculations and
empty words aimed at jawboning the markets. Trump is certainly very uneasy
right now with the stock market making new lows, much higher Treasury yields,
triple digit oil prices and the Fed in a “wait and see” mode.
The path of least
resistance for the dollar remains to the upside but traders will keep a
watchful eye on the headlines and especially on Trump’s Truth Social account,
as we are always one post away from huge market moves.
Traders are not pricing in
any change to interest rates this year as we have just 3 bps of easing expected
by year-end.
EUR:
On the EUR side, the recent
data showed what everyone expected to happen to the economy, that is higher headline
inflation and weaker economic activity. The ECB continues to stress vigilance
and maintain a data-dependent and meeting-by-meeting approach. ECB policymakers
are keeping a tightening bias conditional to the length of the conflict.
The market is pricing in a
58% chance of a rate hike at the upcoming meeting with an 87% probability of a
move in June. The total tightening expected by year-end is currently seeing
roughly three rate hikes.
The ECB will likely look
through the inflation spike at the April meeting but lay the groundwork for a
rate hike in June if the US-Iran conflict were to persist. These expectations
will get repriced quickly though if the war were to end in the next couple of
weeks.
EURUSD TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that EURUSD eventually rejected the trendline
and fell below the 1.15 handle again. The natural target is the 1.1392 level
where we can expect the buyers to step in with a defined risk below the level
to position for a rally back into the 1.16 handle. The sellers, on the other hand,
will look for a break lower to increase the bearish bets into new lows.
EURUSD TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have
a downward trendline defining the bearish momentum. The sellers will likely
continue to lean on the trendline with a defined risk above it to keep pushing
into new lows, while the buyers will look for a break to pile in for a pullback
into the major trendline around the 1.1550 level.
EURUSD TECHNICAL ANALYSIS –
1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the sellers will look
for a rejection around the trendline, while the buyers will look for a break. The
red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we get the US Consumer Confidence and US Job Openings data. Tomorrow,
we have the US ADP, the US Retail Sales and the US ISM Manufacturing PMI. On
Thursday, we get the latest US Jobless Claims figures. On Friday, we conclude
the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.
