Talking Points:
- The US Dollar[1] has continued to pullback from resistance at the 95.00 level yesterday, and this has helped EUR/USD[2] to bounce after a failed attempt to take out the 1.1500 level yesterday. While little resolution has been seen in the scenarios around European politics, US rate hike bets have started to get pushed-out, with current probabilities reflecting only a 22.7% chance of a total of four rate hikes this year out of FOMC[3]. This removes a bit of pressure from those prior themes of US Dollar strength, and Euro[4] weakness; and a bit of positive European data released this morning has helped to further the retracement.
- The big question is how deep these retracements might run: For those looking to trade a continuation of Euro-weakness, there may be a more compelling case on the short-side of EUR/JPY[5] than EUR/USD, as the US Dollar remains rather stretched, and we could see that move continue to recede should rate hike bets continue to get priced-out of the US. While the Fed has been clear about their ambitions of further normalizing policy, it’s unlikely that they would do so unless absolutely necessary should another wave of risk aversion show through global markets. We looked into this in-depth in yesterday’s webinar, and that’s available from the following link: Risk Aversion Hits the FX Market: Trade it, or Fade it?[6]
- DailyFX Forecasts have been updated for Q2, and are available from the DailyFX Trading Guides page[7]. If you’re looking to improve your trading approach, check out Traits of Successful Traders[8]. And if you’re looking for an introductory primer
