The Euro hasn’t staged a meaningful rally in some time, with each of the three major EUR-crosses showing signs of technical vulnerability. The ECB is balancing raising interest rates and preventing fragmentation in bond markets, for now.
’s difficult balancing act of raising interest rates to combat multi-decade highs in price pressures while preventing fragmentation of sovereign bond markets has proven successful thus farBut growth concerns continue to mount, as Eurozone energy inventories remain depressed ahead of the winter months. It’s looking increasingly likely that the ECB will only be able to hike rates a few more times before the pendulum swings towards a greater focus on avoiding a significant economic downturn.
The Euro’s problems have been kept at bay, but they continue to lurk, posing a risk for the single currency.rates appeared to be breaking out higher last week only to fail immediately, losing the uptrend from the July low and early-August swing low. Momentum is starting to turn lower, with EUR/USD rates below their daily 5-, 8-, 13-, and 21-EMA envelope, which is aligning in bearish sequential order.
lacking a significant bullish catalyst in the near-term may be helping insulate EUR/USD rates from a more substantial pullback, however. Rangebound trading conditions may prevail for the next few weeks.EUR/USD: Retail trader data shows 64.51% of traders are net-long with the ratio of traders long to short at 1.82 to 1. The number of traders net-long is 7.79% higher than yesterday and 25.35% higher from last week, while the number of traders net-short is 3.52% lower than yesterday and 27.
We typically take a contrarian view to crowd sentiment, and the fact 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.
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