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EUR USD - FUNDAMENTAL DRIVERSEUR FUNDAMENTAL BIAS: BEARISH 1. Monetary Policy Less dovish than expected can some of the ECB Dec pol decision. As expected, the bank announced that PEPP will discontinue from March 2022, but they announced a surprise decline monthly purchases under the APP, which will see purchases increased to EUR 40bln from EUR 20bln from2Q22 and then subsequently lowered to EUR 30bln in Q3 and down to EUR 20bln in 4Q22. Markets were not expecting any reduced purchases under the PEPP, so expecting the APP amount to return to EUR 20 billion by end next year was less dovish than expected. On inflation there was no surprises with updated staff econ projections showed 2023 HICP at 1.8% which reiterated the bank’s view that inflation will return to below target in the med-term. President Lagarde struck a familiar tone regarding rates by reaffirming that rates are unlikely to rise next year. As usually ECB sources provided more colour after the meeting by showing further disagreements among the GC regarding with the hawks unhappy with extending PEPP reinvestments to 2024 and not setting an end-date to the APP, and of course disagreed that inflation risks as skewed higher. Overall, the bank was less dovish than expected but the stark policy divergence between the ECB and the likes of the Fed and BoE means the bias for the EUR remains tilted lower in the med-term. 2. Economic & Health Developments Even though the recent activity data suggests the hit to the economy from previous lockdowns weren’t as bad as feared, the massive climb in case numbers across Europe (including Omicron cases) have seen more restrictive measures which will drag on growth. Further lockdown measures will probably see a further divergence in growth differentials between the EU and other major economies (and combined with ongoing central bank policy divergence) the fundamental outlook remains bearish for the EUR. On the fiscal front, attention is still on ongoing discussions among EU states to potentially allow the purchase of green bonds NOT to count against budget deficits. Such a decision could drastically change the fiscal picture and we would expect it to be a big positive for the EUR and EU equities if that change should come to pass. 3. Funding Characteristics As a low yielder (like JPY & CHF), the EUR has been a funding choice among carry trades, especially during 2019 where it was a favourite against high yielding EM. Also, part of the EUR upside in the initial risk-off scare in March 2020 was attributed to an unwind of large carry trades. Recently the EUR has exhibited some resilience during risk off tones. As more central banks start normalizing policy, the EUR’s use as a funder could add additional pressure in the med-term. But it could also spark risk off upside if some of those trades unwind. 4. CFTC Analysis Latest CFTC data showed a positioning change of +5080 with a net non-commercial position of -1554. Even though positioning isn’t stretched on the large speculator side, it’s a different story for leveraged funds which is still sitting on the biggest net-short for the majors. That means watching key technical levels to the upside such as 1.1380 for possible squeezes will be important in the week ahead. USD FUNDAMENTAL BIAS: BULLISH 1. Monetary Policy A lot more hawkish than expected is how the Fed’s Dec decision can be summed up. The Fed doubled the pace of tapering to $30 billion per month which will see the QE program conclude by March 2022 as was widely expected. The big change came from the updated Summary of Econ Projections where the median dot plot pencilled in 3 hikes for the Fed next year (up from just shy of 1 hike projected just 3 months ago), confirming money market and Fed Fund Future expectations. Fed Chair Powell explained they hadn’t decided whether to pause between the end of tapering and a first hike but reiterated that rates will likely only rise when the taper has concluded. Another positive shift was Powell’s comments that the balance of goals means it could possibly raise rates before full employment has been met due to high inflation, and also stated that with inflation above target, they cannot wait too long to get to maximum employment with current levels of inflation described as a threat to full employment. The hawkish tilt even went so far that the bank started to discuss the balance sheet but said they didn't make any decisions on when the balance sheet would shrink. Even though the dots projected 3 hikes for 2022, the updated rate hike trajectory only showed 1 additional hike over the forecast horizon, which combined with a lower terminal rate was less hawkish than some had feared. Nonetheless, with this recent meeting the Fed is now the second most hawkish CB after the RBNZ and should be supportive for the USD in the med-term. This past week’s meeting minutes also revealed that the bank has started discussing QT with majority of members thinking it’s appropriate to start QT soon after rate lift off which was a much more hawkish tilt than expected from the Fed. 2. Real Yields With the hawkish tilt from the Fed, it should see breakeven inflation rates fall faster than US10Y as a more aggressive Fed should see med-term growth & inflation expectations fall. Rising real yields should be good for the USD as well and one to keep on the radar, especially after this weeks divergence. 3. Global Risk Outlook What happens to growth and inflation this year will be key for the USD, not only growth and inflation in the US though but also on a global scale. The USD usually does bad in reflationary environments (where growth and inflation accelerates globally), while the USD usually does very well when growth and inflation decelerates globally). So, expectations that we are seeing a slowdown in both of them globally should be a positive input for the USD in the med-term. However, it also means there will be a lot of focus on the incoming data to see how it develops. 4. CFTC Analysis Latest CFTC data showed a positioning change of +2289 with a net non-commercial position of +39078. With large specs net-longs close to 2019 highs and leverage funds USD longs also looking stretched, and with a lot of the Fed hawkishness arguably priced in, the USD has been looking vulnerable to some unwinding, which is what we saw this past week. Even though the Fed remains on a hawkish path (for now) and the USD remains bullish from a fundamental outlook point of view, with positioning where it is right now, any recovery in risk sentiment or bad economic data in the US relative to the rest of the world could continue to add some pressure on the Greenback in the short-term. However, it will take a lot to change the overall fundamental bullish outlook given what markets are expecting from 2022.
by thunderpips
37
EUR-USD Monthly Levels Analysis! Buy! Hello,Traders! EUR-USD is retesing a long term falling support line But the nature of the falling support lines Suggests that the pair might be sliding down Alont the line slowly, so this is not definitve However, If we consider that the rising support line Is nearby, then it becomes clear that once the pair Retests the confluence of the rising and falling support lines We might see a big bullish correction to retest the horizontal resistance Unless the pair breaks the pattern Buy! Like, comment and subscribe to boost your trading! See other ideas below too!
Long
by TopTradingSignals
7
🔥HAPPY NEW YEAR TRADERS🔥 HAPPY NEW YEAR TRADERS! This year in trading was not an easy one for sure. The market has clearly changed and we are still in a way Adjusting to new ways of how the market moves and reacts. However, the key levels work wonders as always And I daresay they always will, Because they are based on the Laws of the supply and demand And also on the markets financial architecture itself So until that changes we will keep making money on the market And this year good money was made too! My Friends, I wish you all the Happiest New Year And let all your dreams come true this year!
Long
by ProSignalsFx
11
John Wicks SuitWe have been in this Horizontal Triangle forever! It is taking more time to break than John Wicks suit. Don't be an amateur and jump in too early. Wait for the break and retest. Be smart like Albert Einstein . E = MC2 (Entry = Master Control x2) Control, the gift that keeps on giving. Avoid early entries like James Bond avoids the bad guys. Resist the urge and the Aston Martin will be yours! Direction? What direction? Trade the chart. Resist! Patience! Win!
by NinjaTradingServices
EUR-USD Mid-Term Analysis! Sell! Hello,Traders! EUR-USD is trading in a downtrend And as you can see, there is a strong Falling trend-line that was respected multiple times So I think that even if we see some bullish correction Amids the lack of liquidity during the holiday season After the retest of the falling trend-line I would be expecting a move down To retest the horizontal support below Sell! Like, comment and subscribe to boost your trading! See other ideas below too!
Short
by TopTradingSignals
24
EURUSD - Roads to the mastering of positional play(an affinity between 'C' legs and 'impulsive' swings.... patience pays) 1. Counter the false conception that every single break lower has to produce an immediate effect; waiting plays and methodical moves are totally justified. 2. Recognise the idea of prevention in this breakdown as being a key reversal in play! With this in mind, the struggle for sellers to keep buyers from breaking up, and in doing so preventing any sense or organisational defence to your position is just asking for trouble. Technically we are at a very important point, a lot of air above till 1.19 and 1.21. 3. Have tremendous respect for wave strategy, avoid any premature moves, when the timing is right, begin to flank your opponent and play to operate under the watchword of centralisation. 4. Aim for a total swing, if you are not in from 1.161/1.162, 1.168x, still a great deal of mobility in the risk to reward at these levels. The barrier at 1.15 on the one side, with very little till 1.21 to the other. 5. Get used to inflation becoming the restraint of ECB; do not let Lagarde lip service approach intoxicate your decision making. 6. What is important here to remember, play is an attack, not defence, but only momentum! For those who were following the earlier stages in this leg, we are trading a very similar setup to:
Long
by ridethepig
16
Euro / Dollar Ready For Launch Hi traders Euro / Dollar has been on watch list from last week and the market has given us more confluence factors to support our upside bias and I anticipate this move will come this week. I am not completely satisfied on the exit on this trade so will trail a tight stop loss once we get to target 1 to lock in those profits. Let me know in the comments below what you think of this analysis and if this is something your adding to your watch list for the week ahead. Have a wonderful week as always and remember the difference between a profitable and non-profitable trader is risk management! Take care, The Fx Chartist
Long
by TheFxChartist_
EURUSD Hit Resistance at 1.14, to Retest Support at 1.118Trend Analysis The main view of this trade idea is on the 4-Hour Chart. The Forex Cross EURUSD hit some resistance around the 1.14 level and is attempting to retest the 1.118 level. The overall trend is down, breaking lower from its short term moving average (MA). EURUSD continues to be below is medium and long term MAs. A negation of this move will be observed if EURUSD rallies above 1.131. The longer term view concurs with the short term. EURUSD is trending lower, unable to break above 1.14. Technical Indicators EURUSD is in a downtrend. Currently the FX Cross is trending below its short (50-MA), medium (100-MA) and long (200-MA) fractal MAs. Negative crossovers occurred a couple months ago. The RSI is below the 50 level and the KST is in a sell mode. Recommendation The recommendation will be to go short at market, with a stop loss at 1.131 and a target of 1.118. This produces a risk/reward ratio of 1.33 Disclaimer The views expressed are mine and do not represent the views of my employers and business partners. Persons acting on these recommendations are doing so at their own risk. These recommendations are not a solicitation to buy or to sell but are for purely discussion purposes. At the time of publishing I have exposure to EURUSD.
Short
by Ceddy86
1