EUR/USD Price, Chart, and Analysis
- German inflation y/y hits a multi-decade high of 7.9%.
- EUR/USD eyes resistance around 1.0800.
German price pressures today hit a fresh multi-decade high with annual inflation hitting 7.9%, while monthly inflation rose by 0.9%. Both figures beat market expectations by a margin. On a harmonized basis, German inflation hit 8.7% in May. This latest reading will give the ECB a further headache as the central bank looks to quash inflation via higher interest rates while leaving monetary policy loose enough to let the economy grow.
Earlier today, the European Central Bank’s chief economist Philip Lane pushed back against recent calls for 50 basis point interest hikes by various central bank members, saying the ECB should hike by 25bp clips in July and September, moving the benchmark rate out of negative territory in Q3.
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EUR/USD is back at levels last seen nearly five weeks ago on a combination of a strong Euro and a weak US dollar. While ECB rate hike expectations have been growing in the past few weeks, over in the US interest rate expectations have been falling as markets price out some of the more hawkish calls. This has led to the Bund/UST 10-year yield spread to narrow, boosting EUR/USD. The daily chart shows a clean break above the 50-day simple moving average, allowing the pair to set up for a re-test of the 1.0800 area.
EUR/USD Daily Price Chart May 30, 2022
Retail trader data show 60.52% of traders are net-long with the ratio of traders long to short at 1.53 to 1. The number of traders net-long is 1.03% higher than yesterday and 11.34% lower from last week, while the number of traders net-short is 6.75% higher than yesterday and 21.82% higher 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.
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