Euro Outlook:
- None of the major EUR[1]-crosses suggest that the lows are in just yet, from a technical perspective.
- EUR/JPY[2] rates have broken their multi-month uptrend, EUR/GBP[3] rates have experienced a failed bullish breakout, and EUR/USD[4] rates just touched parity.
- Per the IG Client Sentiment Index[5], EUR/JPY[6] and EUR/USD[7] rates have bearish biases while EUR/GBP[8] rates have a mixed bias.
ECB Falls Further Behind
The European Central Bank’s efforts to keep a lid on bond yields may be working so far – at least if you look at what’s happening with Greek, Italian, Portuguese, and Spanish yields – but the currency market is telling a different story. Significant questions remain over how the ECB will be able to successfully navigate raising rates to combat inflation while preventing fragmentation of Eurozone bond markets, leading to a dramatic underperformance by the Euro in recent weeks.
The questionable fundamental picture in the near-term has helped catalyze a meaningful reversal in the major EUR-crosses. EUR/JPY rates have broken their multi-month uptrend. EUR/GBP rates have experienced a failed bullish breakout, and EUR/USD rates just touched parity. There are no technical reasons to suggest that the worst is over yet.
EUR/USD RATE TECHNICAL ANALYSIS: DAILY CHART (July 2021 to July 2022) (CHART 1)
At the end of June[9], it was noted that “range trading remains the preference until either support around 1.0349/97 breaks to the downside or resistance around 1.0757/1.0806 is breached to the upside.” The downside break transpired last week, setting up a measured move towards 0.9892. After briefly touching parity today, EUR/USD rates have rebounded, but momentum remains bearish. EUR/USD rates are below their daily 5-, 8-, 13-,
