- EUR/USD is set to close out the week below 1.1300, a potentially bearish signal for next week.
- The pair was weighed heavily by European lockdown concerns and later hawkish Fed commentary.
Things are not looking good for EUR/USD, with the currency pulling back beneath the psychologically important 1.1300 level as FX volumes thin and the weekend approaches. Technicians may well view failure to close to the north of 1.1300 as a bearish signal heading into next week. Since EUR/USD broke below a long-term descending trend channel, its not particularly surprising to have seen the pace of the sell-off pick up in recent days. Bearish technicians will have their sights firmly set on a test of the next key area of support around the 1.1150-1.1180 area.
Recapping the day's action then: EUR/USD started the session off above 1.1370, but as the news hit on Friday morning that Austria was to implement a full lockdown and that Germany soon follows, the pair dropped like a stone. Analysts unanimously agree that widespread lockdowns in Europe over the coming months will deliver a significant blow to the Eurozone growth (meaning negative revisions to forecasts), giving the ECB more reason to be dovish in the face of high inflation. By the late European morning, the pair had printed a fresh 16-month lows at 1.12501. Some profit-taking then allowed it to recover back as high as 1.1320 as the US session began, but hawkish vibes from key Fed members which injected upside into short-end and real US bond yields gave USD a boost.
For reference, Governor Christopher Waller called for an accelerated QE taper and said that rate increases could be appropriate as soon as Q2 2022. This followed a similar message from St Louis Fed President James Bullard, who earlier in the week urged the Fed to double the pace of its QE taper to $30B per month in January. Shortly after Waller had finished orating, it was influential Vice Chairman of the FOMC Richard Clarida’s turn. He didn’t speak much on policy but did say that it may be appropriate to discuss an accelerated QE taper in December. Plenty more FOMC members will hit the wires next week market participants will be eager to assess the appetite on the Committee for an accelerated QE taper and earlier rate hikes.
Looking back on the week in its entirety, it’s been an ugly one. At present levels, the pair is set to close with weekly losses of about 1.4%, its worst performance since mid-June. Strong US Retail Sales, NY and Philly Fed survey, Weekly Jobless Claims and Building Permits data, as well as on Friday all helped the dollar push on. Meanwhile, the resolutely dovish tone of core ECB members and the escalating Covid-19 crisis in Europe hurt the single currency.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
AUD/USD stands firm above 0.6500 with markets bracing for Aussie PPI, US inflation
The Aussie Dollar begins Friday’s Asian session on the right foot against the Greenback after posting gains of 0.33% on Thursday. The AUD/USD advance was sponsored by a United States report showing the economy is growing below estimates while inflation picked up. The pair traded at 0.6518.
EUR/USD mired near 1.0730 after choppy Thursday market session
EUR/USD whipsawed somewhat on Thursday, and the pair is heading into Friday's early session near 1.0730 after a back-and-forth session and complicated US data that vexed rate cut hopes.
Gold soars as US economic woes and inflation fears grip investors
Gold prices advanced modestly during Thursday’s North American session, gaining more than 0.5% following the release of crucial economic data from the United States. GDP figures for the first quarter of 2024 missed estimates, increasing speculation that the US Fed could lower borrowing costs.
Bitcoin price continues to get rejected from $65K resistance as SEC delays decision on spot BTC ETF options
Bitcoin (BTC) price has markets in disarray, provoking a broader market crash as it slumped to the $62,000 range on Thursday. Meanwhile, reverberations from spot BTC exchange-traded funds (ETFs) continue to influence the market.
US economy: Slower growth with stronger inflation
The dollar strengthened, and stocks fell after statistical data from the US. The focus was on the preliminary estimate of GDP for the first quarter. Annualised quarterly growth came in at just 1.6%, down from the 2.5% and 3.4% previously forecast.