- Candlesticks are positioned in the bearish channel between lower blue and red bands.
- RSI is below 50 (green rectangle), which is the bearish side of the oscillator. The longer it maintains this position, the greater the probability for lower prices ahead.
- Trend-following EMAs have crossed down (top black ellipse).
- Momentum-based stochastic has crossed down (bottom black ellipse).
- If the EMAs maintain angle and separation and the stochastic makes its way to the lower quintile and holds (blue arrow), the underlying momentum will be to the downside, putting pressure on the EURUSD price.
Last week saw an easing in Europe's high inflation. The flash headline CPI came in at 6.1% y/y which was lower than the 6.3% y/y expected and lower than the previous reading of 7% y/y. Flash core CPI was also lower than anticipated at 5.3% y/y (vs 5.5% y/y expected) and lower than the previous 5.6% y/y.
In response, the spread between the German and US 2-year notes has been narrowing since May. Despite this easing, the dovish stance does not seem to be gaining momentum in the lead-up to the upcoming policy announcement by the European Central Bank. President Christine Lagarde's recent remarks reaffirming her support for a more stringent approach have likely played a significant role in maintaining market expectations, with the July meeting still priced at a 40-45 basis points level.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.