November 30, 2023

EUR/USD Propped Up by Short-Term US Dollar Weakness

EUR/USD Price, Chart, and Analysis

  • US event and data risk will drive the move in EUR/USD.
  • Bearish flag formation remains in play.

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The US dollar is trading in a narrow range today ahead as traders wait to hear Fed Chair Jerome Powell’s latest thoughts today before the latest set of inflation data are released tomorrow. Risk markets have been on edge over since the start of the year as markets continue to price in further Fed tightening to combat spiraling price pressures. Wednesday’s inflation release is expected to show core inflation rising to 5.4% in December compared to 4.9% in November, while headline inflation is expected to hit 7% compared to 6.8% in the prior month. Financial markets are already pricing in four 0.25% rate hikes this year along with balance sheet reduction (quantitative tightening) from June onwards. So far the US dollar has not pushed too far ahead on these expectations but risk markets have fallen lower.

EUR/USD is currently trading around 1.1330, aided by a marginally weaker US dollar. The pair have remained within a 2-2.5 point range over the last two months with a marginal upward slope provided by some higher lows. This bearish flag formation continues to play out with 1.1270-1.1290 the current zone of support, while resistance is seen just under 1.1390.

EUR/USD Daily Price Chart January 11, 2022

EUR/USD Propped Up by Short-Term US Dollar Weakness

Retail trader data show 56.12% of traders are net-long with the ratio of traders long to short at 1.28 to 1. The number of traders net-long is 8.41% higher than yesterday and 12.33% lower from last week, while the number of traders net-short is 8.69% lower than yesterday and 27.88% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/USD prices may continue to fall. Positioning is more net-long than yesterday but less net-long from last week. The combination of current sentiment and recent changes gives us a further mixed EUR/USD trading bias.

What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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