My EURUSD Sells update after FOMC meeting !! - Who's holding ??
EURUSD Weekly Outlook (19/09/2024): Slight Bearish Bias
The EURUSD pair appears to be leaning towards a bearish bias this week, driven by several key macroeconomic factors and market dynamics. Let’s break down the main drivers shaping this outlook:
1. US Federal Reserve’s Hawkish Stance
The Federal Reserve's upcoming meeting is in sharp focus, with markets anticipating a potential reaffirmation of its "higher-for-longer" interest rate policy. Recent commentary and data suggest that inflation is still a concern in the U.S., and the Fed remains vigilant in maintaining a restrictive policy stance. The hawkish outlook for US rates bolsters the USD, placing pressure on EURUSD.
Expectations for future rate hikes or at least prolonged elevated rates support the dollar, as the interest rate differential between the U.S. and Europe continues to widen in favor of the USD.
2. European Central Bank (ECB) Dovish Tilt
Contrasting with the Fed, the ECB has shown signs of softening its hawkish tone. Last week, the ECB decided on what many view as a "dovish hike," raising rates but signaling that the peak of the hiking cycle may be near. The Eurozone's economic growth outlook is deteriorating, with concerns over a recession in key economies like Germany.
This dovish stance is weighing on the euro, as markets are pricing in fewer rate hikes going forward. With interest rate differentials playing a crucial role in FX markets, this is a key bearish driver for EURUSD.
3. Eurozone Economic Weakness
Recent economic data from the Eurozone has been disappointing. Manufacturing activity remains sluggish, and service sector growth has shown signs of stalling. Germany, the bloc’s largest economy, is particularly concerning, with its manufacturing PMI in contraction territory for months.
Furthermore, rising energy costs could add pressure on European economies, potentially reigniting inflationary concerns but also hindering growth. This weaker growth outlook could deter investors from taking long positions in the euro.
4. US Economic Resilience
On the other hand, the U.S. economy continues to show resilience. Robust labor market figures, strong consumer spending, and better-than-expected GDP data indicate that the U.S. economy is outperforming the Eurozone. This contrast in economic performance provides further support for the USD.
Moreover, the U.S. bond market continues to offer attractive yields relative to European bonds. Higher U.S. Treasury yields, especially on the long end of the curve, are a key factor driving demand for the dollar.
5. Geopolitical Risks & Energy Concerns
Geopolitical tensions, particularly surrounding the war in Ukraine and ongoing disputes over energy supplies in Europe, pose an additional downside risk for the euro. While energy prices have stabilized in recent months, any renewed supply disruptions as Europe heads into the winter season could reignite concerns over inflation and economic stability in the region.
If energy prices surge again, it could lead to further economic strain in the Eurozone, potentially pushing EURUSD lower.
Technical Outlook
From a technical perspective, EURUSD is currently testing key support levels around 1.0650–1.0700. A sustained break below these levels could open the door for a move towards the 1.0500 region, especially if the dollar continues to strengthen on Fed-related optimism.
On the upside, resistance lies near the 1.0800–1.0850 zone. Bulls would need to see a clear catalyst, such as dovish Fed signals or improved Eurozone data, to challenge these levels.
Conclusion
Given the hawkish Fed, dovish ECB, and weaker Eurozone economic data, EURUSD is likely to maintain a bearish bias this week. Traders should keep an eye on key U.S. data releases and any unexpected geopolitical developments that could impact market sentiment.
My personal Key levels to watch:
- Support: 1.0650, 1.0500
- Resistance: 1.0800, 1.0850
The EURUSD pair appears to be leaning towards a bearish bias this week, driven by several key macroeconomic factors and market dynamics. Let’s break down the main drivers shaping this outlook:
1. US Federal Reserve’s Hawkish Stance
The Federal Reserve's upcoming meeting is in sharp focus, with markets anticipating a potential reaffirmation of its "higher-for-longer" interest rate policy. Recent commentary and data suggest that inflation is still a concern in the U.S., and the Fed remains vigilant in maintaining a restrictive policy stance. The hawkish outlook for US rates bolsters the USD, placing pressure on EURUSD.
Expectations for future rate hikes or at least prolonged elevated rates support the dollar, as the interest rate differential between the U.S. and Europe continues to widen in favor of the USD.
2. European Central Bank (ECB) Dovish Tilt
Contrasting with the Fed, the ECB has shown signs of softening its hawkish tone. Last week, the ECB decided on what many view as a "dovish hike," raising rates but signaling that the peak of the hiking cycle may be near. The Eurozone's economic growth outlook is deteriorating, with concerns over a recession in key economies like Germany.
This dovish stance is weighing on the euro, as markets are pricing in fewer rate hikes going forward. With interest rate differentials playing a crucial role in FX markets, this is a key bearish driver for EURUSD.
3. Eurozone Economic Weakness
Recent economic data from the Eurozone has been disappointing. Manufacturing activity remains sluggish, and service sector growth has shown signs of stalling. Germany, the bloc’s largest economy, is particularly concerning, with its manufacturing PMI in contraction territory for months.
Furthermore, rising energy costs could add pressure on European economies, potentially reigniting inflationary concerns but also hindering growth. This weaker growth outlook could deter investors from taking long positions in the euro.
4. US Economic Resilience
On the other hand, the U.S. economy continues to show resilience. Robust labor market figures, strong consumer spending, and better-than-expected GDP data indicate that the U.S. economy is outperforming the Eurozone. This contrast in economic performance provides further support for the USD.
Moreover, the U.S. bond market continues to offer attractive yields relative to European bonds. Higher U.S. Treasury yields, especially on the long end of the curve, are a key factor driving demand for the dollar.
5. Geopolitical Risks & Energy Concerns
Geopolitical tensions, particularly surrounding the war in Ukraine and ongoing disputes over energy supplies in Europe, pose an additional downside risk for the euro. While energy prices have stabilized in recent months, any renewed supply disruptions as Europe heads into the winter season could reignite concerns over inflation and economic stability in the region.
If energy prices surge again, it could lead to further economic strain in the Eurozone, potentially pushing EURUSD lower.
Technical Outlook
From a technical perspective, EURUSD is currently testing key support levels around 1.0650–1.0700. A sustained break below these levels could open the door for a move towards the 1.0500 region, especially if the dollar continues to strengthen on Fed-related optimism.
On the upside, resistance lies near the 1.0800–1.0850 zone. Bulls would need to see a clear catalyst, such as dovish Fed signals or improved Eurozone data, to challenge these levels.
Conclusion
Given the hawkish Fed, dovish ECB, and weaker Eurozone economic data, EURUSD is likely to maintain a bearish bias this week. Traders should keep an eye on key U.S. data releases and any unexpected geopolitical developments that could impact market sentiment.
My personal Key levels to watch:
- Support: 1.0650, 1.0500
- Resistance: 1.0800, 1.0850
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