EUR/USD Drops Ahead of US Growth & Inflation Updates

  • EURUSD
    (${instrument.percentChange}%)

EUR/USD Analysis

Fears of recession have led to a pullback in market pricing around the Fed's tightening path, which along with fresh hawkish commentary by ECB officials and an improvement in broader sentiment, allowed the pair to stage a relief rally from its twenty years low on Wednesday.

CME's FedWatch Tool still projects another 75 basis points hike in November and 50 bps in December, but now assigns lower probabilities of 58.5% and 55.9% respectively, at the time of writing. [1]

On the European Central Bank front, Mr Kazimir backed another 75 basis points hike for the next meeting adding that poicy makers have to be "vigorous, even ruthless, regardless of the looming recession" according to Reuters. [2]

Today however, sentiment takes another nosedive, as markets brace for the updated US GDP figure, while on Friday we expect the PCE Inflation report, which can determine the pair's trajectory and spark volatility.

As such, yesterday's rally falters and EUR/USD slumps again today, after its failure to tackle key 38.2% Fibonacci of the September high/low plunge. This can lead to fresh twenty years low towards 0.9483, although sustained sub-0.9390 moves, have a higher degree of difficulty in the near term.

Trade the News: View our Economic Calendar

The common currency managed to close Wednesday above the EMA100 and has not lost all hope for another push to 0.9790, but it will need help from the economic data for that. At this stage though, ascending prospects appear limited and we struggle to see how it can post a more significant recovery towards mid-09900s.

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 29 Sep 2022 https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html#

2

Retrieved 26 Nov 2022 https://www.reuters.com/markets/europe/ecb-must-place-inflation-concerns-above-growth-lagarde-says-2022-09-28/

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