EUR/USD Price, Chart, and Analysis
- ECB hawks are out in force following yesterday’s interest rate hike
- Euro Area inflation remains elevated and sticky.
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How to Trade EUR/USD
The European Central Bank (ECB) hiked interest rates by 50 basis points yesterday and further rate increases can be expected according to policy maker commentary out earlier today.
ECB Villeroy de Galhau – We decided to do what we said we would do rates. (Our) Priority is to fight inflation.
ECB Kazimir – Need to continue with rate hikes but no need to speculate about the decision in May. Core inflation is sticky and upside risks to inflation dominate. ECB not at the finishing line.
ECB Simkus – The February core inflation dynamics are worrying. I still believe this wasn’t the last interest rate hike. The terminal rate hasn’t been reached. Wage pressures are gaining more strength on core prices.
Yesterday’s 50bp rate hike by the ECB while expected, was only agreed upon by policymakers after the Swiss National Bank (SNB) said that it would open a Swiss Franc 50 billion lending facility for Credit Suisse, according to an ECB sources report. The ECB also feared that if they didn’t go through with a half-point increase that investors may see their inaction as a cause for concern. President Lagarde specifically said at the February meeting that the central bank would raise rates by 50bps.
The latest Euro Area inflation data shows why the ECB is becoming more adamant that additional rate hikes are needed. The final figures for February show annual headline inflation running at 8.5%, down one-tenth of a percentage point from the prior month, while core inflation rose to 5.6% from 5.3% in January.
According to data compiler Eurostat, ‘The lowest annual rates were registered in Luxembourg (4.8%), Belgium (5.4%) and Spain (6.0%). The highest annual rates were recorded in Hungary (25.8%), Latvia (20.1%) and Czechia (18.4%). Compared with January, annual inflation fell in fifteen Member States, remained stable in two and rose in ten.’
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EUR/USD is moving higher today, buoyed by rate hike talk, and eyes a cluster of recent highs and the 50-day moving average around 1.0690 to 1.0760. A confirmed break above here opens the way to 1.0791, quickly followed by 1.0800.
EUR/USD Daily Price Chart – March 17, 2023
Chart via TradingView
of clients are net long.
of clients are net short.
Retail Positioning is Mixed
Retail trader data show 53.61% of traders are net-long with the ratio of traders long to short at 1.16 to 1.The number of traders net-long is 19.29% lower than yesterday and 11.06% lower from last week, while the number of traders net-short is 21.63% higher than yesterday and 7.03% lower 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. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse higher despite the fact traders remain net-long.
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.