EUR/USD Cautious as Markets Digest Mr Powell’s Comments and Eurozone inflation

  • EURUSD
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EUR/USD Analysis

In the press conference after the Fed's largest hike in 22 year earlier in the month, Mr Powell had appeared somewhat conservative around the tightening path, having essentially taken off the table 75 basis point increases. [1]

Speaking on Wall Street Journal's Future of Everything Festival on Tuesday, Mr Powell reasserted the bank's hawkishness saying that officials need to see "clear and convincing evidence inflation pressures are abating and inflation is coming down" and if they don't, then they will to consider "moving more aggressively". He added that in pursuit of this task, officials "won't hesitate at all" to go beyond "broadly understood levels of neutral".[2]

The European Central Bank is far behind its US counterpart, but has been moving towards more hawkish stance, as it too is troubled by high inflation, which however stabilized in April, as today's data showed. Final Eurozone Consumer Price Index came in at +7.4% year-over-year, which was lower than the preliminary figure and same as the final reading for March.

EUR/USD comes from a three-day recovery after Friday's 5+ years low (1.3048) as sentiment improved, having reclaimed 1.0500 from our last analysis, which brings the key EMA200 in its crosshairs (1.0670). However, it will likely need a catalyst for closes below this level that would pause the downside bias and could open the door for a larger recovery towards the ascending trendline from the 2022 highs (at round 1.0860-80).

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The pair is soft today as markets digest the aforementioned developments and although risk for a breach of 1.0339 subsides, given the recent advance, it is far from canceled. The technical outlook has not changed, as medium-term bias remains on the downside.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 18 May 2022 https://www.federalreserve.gov/monetarypolicy/fomcpresconf20220504.htm

2

Retrieved 01 Jul 2022 https://www.youtube.com/watch

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