Weekly forecast for the euro – Will the ECB disappoint the hawks next week?
Business

Weekly forecast for the euro – Will the ECB disappoint the hawks next week?

admin


EUR/USD Price, Chart and Analysis

  • The ECB must substantiate market expectations for higher rates.
  • EUR/USD is approaching a new two-year low.

The European Central Bank’s policy decision and press conference next week look set to be a special test meeting for ECB President Lagarde, who seeks to strike a policy balance to dampen rampant inflation while supporting weak growth prospects. And this comes at a time when other major central banks may or may not be willing to raise interest rates in ever greater increments. The next two Federal Reserve hikes will come in 50 basis point snippets, the Bank of Canada’s next hike will likely be the same, while next week’s Reserve Bank of New Zealand meeting will be a close run between 25 bps and 50 fps. It seems increasingly likely that rate hikes of 50 basis points will become commonplace for major central banks this year.

For all market-moving data releases and events, see the: DailyFX Economic Calendar

While other major central banks are already tightening monetary policy, the ECB has the unenviable job of containing runaway inflation as the economy begins to stagnate. The market currently expects the ECB to raise interest rates by 60 basis points this year, a start, but if inflation is to become anchored, the ECB will need to signal early that it is ready to go hard. This will be a tough sell to the market as growth in the eurozone slows. There will come a time when the markets will see through the central bank’s loud talk and wait for action. In this scenario, the euro will come under great pressure. Add to that the upcoming French elections and the ongoing crisis in Ukraine and the single currency is likely to remain volatile and fall further.

The EUR/USD daily chart shows the pair trading just above its two-year low, a level that looks set to be tested again in the near future. Below, the double low of just under 1.0650 becomes the nesting area of ​​support.

EUR/USD Weekly Price Chart – April 8, 2022

Show retailer data:73.98% of traders are net long with the ratio of traders long to short at 2.84 to 1. The number of net long traders is 5.24% higher than yesterday and 41.15% higher than last week, while the number of net short traders is 6.82% lower than yesterday and 22.95% lower than last week.

We tend to have an opposing view on crowd sentiment, and the fact that traders are net long suggests EUR/USD prices may continue to fall.Traders are further net long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EUR/USD bearish contrarian trading bias.

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