The Eurodollar is trading down very sharply today, losing another 0.4%. The dominance of the USD seems unquestionable at the moment, and a number of different factors are leading to this; from macro data to bond yields prompting capital to invest funds, in US Treasury securities. Yields on 8-week U.S. Treasury bonds rose above 5% yesterday, and over the past two sessions yields on 10-year notes have risen more than 0.2%.
- The magnitude of the move is essentially accompanied by rather hawkish voices from the ECB, joined today by Kazaks. The ECB member conveyed that if nothing extraordinary happens, the bank will begin easing policy in June.
- In addition, brent crude oil returned above $90 today, suggesting that its possible further rise due to, among other things, the prospect of an Iranian attack on Israel and attacks on Russian refineries could prove to be further fuel to strengthen the dollar and weaken the EURUSD.
- Evidently, the commentary stands in contrast to statements by Fed members, who have been suggesting for several days that one should still wait for incoming data, as current rates may be de facto less of a stopgap for the strong US economy than expected.
- The solid data from jobless claims we learned yesterday will reassure the Federal Reserve that cuts should not even be discussed until inflation shows renewed improvement in services. As a result, a number of banks and institutions have shifted their expectations for policy easing in the US only in the fall, at a time when the ECB's decision in the summer seems rather a foregone conclusion.
Today, the market is mainly waiting for 3 PM GMT, where inflation expectations and consumer sentiment according to the University of Michigan survey will be published. An upward surprise in either reading could strengthen the dollar all the more, as yesterday some Fed members indicated that so far inflation expectations remain in line with the Fed's policy target. Any divergence in this aspect could be seen as another argument for a 'higher for longer' policy.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appEURUSD, D1 interval
Looking at the EURUSD chart on the daily interval, we see that the pair has settled below the SMA200 and is trading in a bearish head-and-shoulders pattern. The overall picture seems to be downward for the Eurodollar quotes, until we see an attempt to overcome 1.08. Meanwhile, the 1.07 level has not been maintained, and despite the lack of surprise from today's final data from Germany and France and higher-than-forecast data from Spain. Significantly, the declines are taking place on heavy falling volume.
Source: xStation.
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
