- EUR/USD lifted by a positive outlook from ECB head economist Praet.
- EUR/USD holding above 21-D SMA, but bulls are wary of the makings of a death-cross formation.
EUR/USD is a slow burner now the price has breached through the 21-D SMA, but is yet to break above 1.18 the figure. The high has been 1.1796 and low 109.79. The euro was strong leading into the NY session on the back of ECB Chief Economist Praet’s bullish assessment of the EZ economy.
The euro was the top of the G10’s in earlier trade when ECB Chief Economist Praet expressed confidence in the euro area’s economic outlook and the ECB’s ability to reach its inflation target.
“The comments suggested that June will be a ‘live’ meeting for discussing an end date to the asset purchase program, paving the way for rate normalization in the second half of 2019,”
analysts at Scotiabank argued.
ECB could set a new precedent for European markets
The renewed sentiment for a hawkish lean from the ECB and a subsequent normalisation of interest rate procedures have firmed and German-U.S. spreads, supporting the euro. On the back of PM Conte’s successful confidence vote in the Senate, accompanied by positive outlooks for the EZ economy, the European major stock indices closed up in early NY trade with modest gains, besides France’s CAC falling by -0.1%:
- German Dax rose 0.4%
- UKs FTSE rose 0.4%
- Spain’s Ibex rose +0.7%
- Italy’s FTSE MIB rose 0.26%
- Portugal’s PSI20 rose 0.50%
10 year debt sector yields were also higher due to ECB hints of a QE exit:
- Italy 2.944%, up 15.4 bps
- Portugal 1.95%, up 9.5 bps
- Germany 0.463%, up 9.3 bps
- France 0.8%, up 10.4 bps
- UK 1.372%, up 8.9 bps
- Spain 1.501%, up 10.5 bps
“Risk reversals suggest a continued moderation in the premium for protection against EUR weakness vs. both the USD and EUR and the near-term balance of risk appears to favour EUR strength,” the analysts at Scotiabank explained.
EUR/USD levels
While, above 1.1617, the 1st June low the corrective bias remains in play. The correction is now a reversal of the 13th May peak at 1.1995 with the price changing hands above the 21-D SMA at 1.1758. RSI is moving aggressively through the neutral territory in a northerly trajectory supporting the bullish bias. However, a 50-D SMA and 200-D SMA death cross could be on the cards should the price pullback significantly. Below recent lows of 1.1509, the 200-week moving average is at 1.1435 and the next significant supports would be at 1.1186/1.0814 (as being the 61.8% and 78.6% retracements).
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