The euro falls after Lagarde; EUR / GBP, towards a new test of 0.8400

Key points of the article:

  • Following Lagarde’s remarks, the euro falls and allows the dollar to hit a 16-month high
  • EUR / GBP: The bearish recovery could take the pair to at least 0.8400

Currency table – Time horizon: daily

Prejudice

Resistence

Support

Note

AUD / JPY

Neutral

86

82.85

AUD / USD

Neutral

0.755

0.72

MM200 in resistance

EUR / AUD

bearish

1,575

1,535

EUR / CHF

bearish

1.07

1.05

Test support

EUR / GBP

bearish

0.866

0.842

EUR / JPY

bearish

134.12

128.5

Test support

EUR / USD

bearish

1.17

1.117

Support at the break 1.1500

GBP / JPY

Neutral

163.9

148.5

Try MM200

GBP / USD

bearish

1,386

1,328

NZD / USD

bearish

0.7308

0.686

USD / CHF

bullish

0.9315

0.91

USD / CAD

bullish

1.2775

1.23

Turning into a rounded cavity

USD / JPY

bullish

114.75

112.73

Following Lagarde’s remarks, the euro falls and allows the dollar to hit a 16-month high

The dollar hit a 16-month high against a basket of major currencies on Monday fueled by concerns over global growth and inflation as investors eagerly await new data this week on the state of US consumption.

The dollar was strengthened on Wednesday by data showing U.S. consumer prices rose last month at the fastest annual rate since 1990, challenging the Federal Reserve’s view that price pressures will be transient and fueling speculation that interest rates will rise sooner than expected.

Demand for the greenback eased on Friday, when a report showed consumer sentiment had fallen to its lowest level in a decade, partly due to soaring inflation, but fell again on Monday after that. Central bankers in Europe and the UK have expressed concerns about growth and prices.

Investors will be looking at US retail sales data this afternoon for clues as to where the dollar might be headed. The data should show that retail sales rose 1.1% last month, according to a Reuters poll.

The other big point of yesterday is the weakness of the euro. Gains in the dollar index, heavily weighted for the euro, were mainly helped by the decline in the single currency, with European Central Bank President Christine Lagarde continuing to reject market expectations in favor of a tighter policy .

Bottlenecks in supply chains and soaring energy costs are slowing eurozone growth and will keep inflation high for longer than expected, Lagarde told the European Parliament’s economic committee on Monday. Inflation in the euro area will decline next year, she said.

The fact that Ms Lagarde reiterated the moderate outlook of ECB members is pushing the euro lower. Against the Swiss franc, the euro hit its weakest level in 18 months just above the psychological threshold of 1.0500.

In Britain, the pound rose towards a data-rich week, with jobs, inflation and retail sales data that should provide clues that the Bank of England will hike rates in December, as the markets expect. The pound hit its lowest level against the dollar on Friday.

EUR / GBP: The bearish recovery could take the pair to at least 0.8400

The euro has resumed its negative trend against the pound. Failure to breach the 200-period moving average has re-awakened selling pressure, which has intensified over the past two sessions. The release of a better-than-expected unemployment figure across the Channel this morning confirmed expectations of a hike in interest rates, while Europe seems far from that prospect.

The 13- and 34-period moving averages are down. The euro sterling could return to the low of the last months at 0.8400. A break would give a target on the 0.8280 support.

To invalidate this scenario, the euro will have to move back above its last high at 0.8600.

Evolution of the euro pound in daily data:

Forex Morning Meeting: Euro falls after Lagarde;  EUR / GBP, towards a new test of 0.8400

Twitter @CDamestoy

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