EUR/USD Price, Chart and Analysis
- Fed Chairman Powell echoes the hawkish rhetoric.
- EUR/USD should decline.
The latest hawkish comments from Fed Chairman Jerome Powell suggest the Federal Reserve is open to raising interest rates by 50 basis points if needed to try to counter searing US inflation. Chairman Powell remarked yesterday that if the Fed thinks it’s “appropriate to raise (by 50 basis points) in a meeting, or a meeting, we will,” sent the yields of the US Treasuries soar, with the interest rate sensitive UST 2-year now trading with a yield slightly lower at 2.19%, its highest level in three years.
US Dollar Outlook – Dancing to the New Fed Soundtrack
US Treasury Two-Year Yield Daily Price Chart – March 22, 2022
Chart and data via @Investing.com
The single currency remains under pressure, with rising energy prices fueling inflation and weighing on growth. In his latest speech, ECB Vice-President Luis de Guindos said that although inflation is expected to remain high “for a longer period”, he does not see stagflation because “even in our most unfavorable for the current year, we still expect growth of more than 2% ECB President Christine Lagarde speaks at 13:15 GMT today and her comments should be watched closely.
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EUR/USD is trading either side of 1.1000 with any upside movement muted. Last Thursday’s high of 1.1138 is unlikely to come under pressure in the short term, while the recent string of higher lows has been convincingly broken. The longer-term series of lower highs and lower lows remain intact and the pair are now testing the Simple 20-day moving average. If this indicator turns into resistance, the bears are likely to push towards 1.0900 and the recent 2-year low at 1.0879.
EUR/USD Daily Price Chart – March 22, 2022
Retail merchant data shows 61.55% of traders are net long with a ratio of long to short traders of 1.60 to 1. The number of net-long traders is 5.98% higher than yesterday and 2.22% lower than last week, while the number of net-short traders is 3.44% lower than yesterday. yesterday and 6.06% from last week. The pair is now testing the 20-day simple moving average
We generally take a contrarian view of crowd sentiment, and the fact that traders are net long suggests that EUR/USD prices may continue to decline. Traders are sharper than yesterday and last week, and the combination of current sentiment and recent changes gives us a a stronger contrarian EUR/USD-bearish trading bias.
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