German GDP YoY: ACT – 1.3%; EST – 1.2%German GDP QoQ: ACT – 0.4%; EST – 0.3%No pivot signs from ECB minutes while ECB officials back higher rates for now.
EURO FUNDAMENTAL BACKDROP
The euro found some bids on Friday morning after better than expected German GDP (see economic calendar below) both YoY and QoQ respectively. Unfortunately, consumer confidence missed forecasts but did increase from the November read. In conjunction with the above economic data, ECB officials reiterated that inflation is seemingly entrenched long-term while the ECB’s Muller erred on the hawkish side (adding to Isabel Schnabel’s comments) and I quote “too risky to wait for a downturn to cool prices” suggesting that more interest rate hike are needed to quell inflationary pressures. Throughout the day we have further ECB speakers which could spark further upside should they look to support the current market sentiment.
EUR/USD ECONOMIC CALENDAR
Source: DailyFX economic calendar
Recessionary fears are still very real for the eurozone but looking at the monetary policy minutes yesterday, there has been nothing along the lines of moderating the pace of rate hikes as we have seen in the U.S..
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, IG
EUR/USD price action is still testing the key area of confluence around the 200-day SMA (blue) and while there is still room for a push higher towards the psychological 1.0500 handle, the fundamental differential between the U.S. and eurozone remains skewed to the USD. Today’s candle close could give short-term directional guidance come next week. A close below the 1.0369 swing low could spark a downside move towards subsequent support zones.
IGCS shows retail traders are currently SHORT on EUR/USD, with 56% of traders currently holding short positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment but due to recent changes in long and short positioning, we favor a short-term downside bias.
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