FUNDAMENTALOVERVIEWUSD:The US dollar strengthened acrossthe board on safe haven demand this week after the US-Iran conflict eruptedover the weekend. The main driver though was the market’s realisation that ratecuts might not come as soon as expected. In fact, higher oil priceswill eventually put upward pressure on inflation and the US data this weekclearly showed that the economy has been re-accelerating since the start of theyear and not slowing down further. Traders pared back theirrate cut bets this week with the total easing by year-end now seen around 36bps vs 58 bps on Friday. Today, we have the US NFP report and all the jobs datawe got up until now suggests that we will likely get good data. EUR:On the EUR side, theUS-Iran conflict led to a surge in energy prices which are feeding into higherinflation expectations. This led the market to price in a rate hike from the ECBthis year. ECB policymakers are cautioning against reacting too fast to MiddleEast events as they could end up being transitory like in the past. This conflict is alreadymuch longer than those we experienced in the past few years. Trump mentionedthat it could last 4 weeks and, although initially it looked like one of hisusual exaggerations, the risk is that he’s really considering going on for sucha long time. This is likely to weigh on growth and a rate hike would makethings even worse.EURUSD TECHNICALANALYSIS – DAILY TIMEFRAMEOn the daily chart, we cansee that EURUSD stalled at the key 1.1575level. This is where the buyers are stepping in with a defined risk below theswing level to position for a rally into the downward trendline. The sellers,on the other hand, will look for breaks to increase the bearish bets into the1.14 handle next.EURUSD TECHNICALANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, there’snot much we can add here as the pair got stuck in a consolidation at the 1.1575level. If the price bounces and breaks above the 1.1655 high, we can expect thebuyers to increase the bullish bets into the trendline. EURUSD TECHNICAL ANALYSIS –1 HOUR TIMEFRAMEOn the 1 hour chart, we can see more clearly the rangebound price action atthe 1.1575 level as traders await new catalysts to push the price below the keylevel. We have the NFP report today which might boost the USD further on strongdata. The red lines define the average daily range for today. UPCOMING CATALYSTSToday we conclude the week with the US NFP report but continue to keep an eyeon the US-Iran headlines as that’s what the market is focused on right now. This article was written by Giuseppe Dellamotta at investinglive.com.
High energy prices and ECB rate hike bets weigh on the euro as growth outlook worsens
