EUR/USD Rebound Looking Increasingly Like a Bull Trap: Key Trading Levels
The markets were a little calm in early European trade on Thursday, after the major US indexes managed to bounce off their lows on Wednesday following a sizeable drop in global indexes and U.S. futures earlier in the day.
Correspondingly, the EUR/USD pair was a touch firmer at the time of writing. But with the US dollar making a strong comeback, this popular currency pair is not out of the woods just yet.
More price action is needed to entice the bulls. For now, the short-term path of least resistance remains to the downside.
Despite the calmer conditions, the selling pressure on risk assets, and therefore the EUR/USD, could resume without a fundamental change in the current macro backdrop.
Right now, the big concern is that the major central banks like the Fed, ECB, and BoE will not reduce interest rates as soon and as much as the markets have been expecting.
While in the case of the US, it is partly because of a relatively stronger economy, elsewhere – especially in the UK and Eurozone – it is mainly because of concerns about inflation remaining sticky, with wage pressures continuing to remain elevated.
We heard from the ECB President on Wednesday, suggesting that borrowing costs could come down in the summer rather than in spring, while several other ECB officials have also expressed concerns about wage inflation.
Christine Lagarde is due to speak again at 15:15 GMT today, while the data highlights from the Eurozone will include the release of the ECB’s meeting minutes at 12:30 GMT.
With the ECB pushing back rate cut expectations, the single currency may well perform better against some of the weaker currencies.
But against the dollar, it will require risk sentiment to improve further before being able to hang around
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