EUR/USD Analysis and Talking Points
German Inflation Rises Above Expectations
German inflation rose to 7.9% in August, up from 7.6%, above expectations of 7.8%. Subsequently reaffirming the case of further ECB tightening, which at present could see the central bank move towards a 75bps hike at its upcoming meeting, according to the more hawkish ECB members. As it stands, money markets are pricing in 62bps of tightening, however, while the ECB may deliver larger than usual rate hike, the bias remains lower for the Euro[2] given the ongoing energy crisis.
Source: DailyFX
A marginal bounce back in the Euro with the single currency once again reclaiming parity. While the bullish RSI divergence indicated that the bearish momentum has slowed, the bias remains the Euro being a fade on rallies. As such, near-term resistance at 1.0090-1.0110 will be closed.
EUR/USD[4] Chart: Daily Time Frame
Source: Refinitiv
FINAL WORD: Month-End Rebalancing
Reminder, today is month-end and thus FX rebalancing may lead to noisy price action as we head towards the 4pm London fix. At present, investment bank models signal net Euro buying, although, as mentioned above, the outlook remains bleak for the Euro given the worsening energy backdrop. As such, any price insensitive spikes in the Euro should be faded.
EXPLAINER OF FX MONTH END REBALANCING
London WMR Fix (1600 London Time): The WMR Fix is one of the most widely used benchmarks for FX trading, taking place every day within a 5-minute window around 1600 London time. The fix provides a standard set of currency benchmark rates so that equity and bond investors can compare portfolio valuations and performance with each other.
The
