The EUR/USD Might Bounce on QE Tapering

EUR/USD Analysis 28 May 2018

EUR/USD Spot Price: 1.1714

Support: 1.1676, 1.1650, 1.1600

Resistance: 1.1750, 1.1800, 1.1850

Trade Ideas - The EUR/USD Tumbles Some More

  • Position: Short
  • Entry Point: 1.1750
  • Stop Loss: 1.1850
  • Take Profit: 1.1600

The EUR/USD is weak and it’s hard to see much upside. I’m looking to enter at key resistance at 1.1750 with a stop loss at 1.1850 and a profit target of 1.1600.

2018-05-28-eurusd-trade-ideas

EUR/USD 240 min Chart - More Weakness

Big Data on the Agenda

The USD continued the bull run that we’ve seen since mid-April and the EUR/USD was one of the pairs to suffer the most. Despite some North Korean headlines that hurt the USD in the short-term, by week's end we were back putting in highs.

As mentioned there has been speculation around that the ECB will look at QE in their June policy meeting. We’ve been waiting for months for the ECB to give us an indication of some kind of tapering. And it has been very slow to come.

Many would suggest that QE has been a failure, with inflation still lagging. We will get an insight into what the current CPI looks like this week as the Eurozone will release its inflation data. The ECB and President Mario Draghi would like to see an uptick and a move towards 2%. As it stands we saw 1.2% in April and the prediction is for a reading of 1.6%. Which is at least on the right track.

A strong figure might just be enough for Draghi and the ECB to flick the taper switch on the bond buying, which could well see a rally in the EUR/USD.

Key Economic Data

Aside from the ECB and inflation, this week we have the big headlines act out of the US in the form of non-farm payroll data. The main figure is always the focus, however, what many are interested in is the rate of wage growth.

Jobs are slowly but surely growing in the US, however all around the world there are many that are concerned about the rate of wage growth. In many instances it is below inflation, which means that the real rate is negative. And that’s a concern for central banks who are keen to lift rates.

Technical Levels

1.1750 was our focus last week and we finally broke through without too much concern. I’m now looking for that level to be support turned resistance and it will be a good level for us to key off. If we push much higher we might need to assess the short-term trend.

To the downside the target is cleary 1.1600. I can’t see us slowing down in the short-term, although the US Dollar Index is starting to show signs of being overextended.

2018-05-28-eurusd-key-levels

EUR/USD - Key Levels

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