Euro week ahead: EUR/USD downside in focus with US CPI ahead
Euro suffers worst two-week performance since September; markets are starting to align with what the Fed’s outlook and EUR/USD Rising Wedge breakout opening door to losses.
Euro fundamental forecast: bearish
Over the past two weeks, the euro sank 0.6% against the US dollar. Not only was this the worst two-week performance since September, but if you measure from a two-week interval, this ended a nine-consecutive winning streak. The last time this happened was back in 1990.
All things considered; it was a pretty quiet week from an economic data perspective. Preliminary German inflation data for January showed that CPI clocked in at 8.7% y/y against the 8.9% forecast. Still, markets were likely focused on the United States this past week.
That is because markets have been receiving a healthy dose of reality since January’s US non-farm payrolls report blowout. Coupled with relatively hawkish Fedspeak and another solid round of jobless claims data, markets have been rapidly repricing the interest rate outlook.
This can be seen in the chart below. Since the day before NFPs, markets have added two Fed rate hikes to the year-end horizon. As such, this is bringing anticipated tightening closer to what the central bank is envisioning.
The week ahead also lacks notable Euro Area economic event risk outside of the second round of fourth-quarter GDP estimates. Rather, the focus will remain on the US. The next round of CPI data is due. The headline rate is seen slowing further to 6.2% from 6.5%. A higher-than-expected outcome could easily continue adding momentum to the euro’s reversal.
Markets are fading 2023 Fed rate cut bets
EUR/USD technical analysis
On the daily chart, EUR/USD has confirmed a breakout under a bearish Rising Wedge. The chart formation has its beginnings in September 2022. Recent losses have opened the door to resuming last year’s dominant downtrend. Key support below could be the 100-day Simple Moving Average (SMA). The latter may reinstate a near-term upside focus.
EUR/USD daily chart
This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material 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 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. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
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. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.