EURUSD: Slightly Higher But Still In A Range?
The European Central Bank (ECB) might have said yesterday that uncertainty related to global factors has “gained more prominence,” as opposed to last meeting’s “remain prominent,” but the lingering feeling after Thursday’s ECB decision and press conference was of a central bank on cruise control. The asset purchase programme will taper and end as previously expected, and the ECB isn’t minded to hike until well into 2019. But the ECB did mention that the eurozone was currently growing at an above-potential rate which, if it continues, could generate inflation. So, taken in tandem with a 0.2 percent rise in US August CPI which came in below the 0.3 percent expected by economists polled by Reuters, there was enough to give the euro a boost versus the US dollar in the post-ECB, post-CPI session. Traders will have noted however that the euro’s initial rally versus the greenback stalled at 1.1700 yesterday. Traders may also wonder whether the rally was more attributable to the US CPI number, coming as it did after last week’s succession of robust US data that had underpinned the idea of USD strength, than to the ECB. The crux of the issue, especially ahead of the weekend, is perhaps whether traders think that the bounce will be sustained or whether the EURUSD, having edged to the upper side of its recent range, will, however, stay in that range. The fact that the US CPI miss hasn’t had any material impact on market expectations for another two Fed rate hikes in 2018 might ultimately swing the argument. From a technical perspective, those traders who do feel the EURUSD is still locked in a range might note, as referred to by analysts at IFR, the proximity of 1.1718 (the high of August 30), and 1.1734 (the high of August 28), and the 100-day moving average is presently at 1.1677.
by Neal Kimberley, External Currency Analyst