Will The ECB Be Dovish Enough?
Just when you think the EURUSD is a runaway train, things took a minor detour with this past week’s events. It was a perfect downside cocktail with better US econ data, record net long positioning, a touch of deflation and a pinch of currency jawboning. The question now is will the downside continue?
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The EURUSD has been ripping higher from May, and has gained almost 12% from the lows seen in April. The fundamentals have supported the recent moves higher, but the short-term picture has become a bit muddy.
Low inflation has been something the ECB has really struggled with for many years now, and this week’s deflation scare has brought this struggle back in focus.
The last thing you want when you are struggling with downside momentum in prices, is having a very strong currency that makes your exports less competitive and pushes prices down. Which is probably why the ECB decided to break their silence on the currency and finally speak up about the fast and rapid recent rise of the EUR, especially versus the USD.
With inflation back in focus, and after this week’s currency jawboning, the attention now turns to this week’s ECB meeting to see whether the central bank can be dovish enough to sustain the recent downside in EURUSD or whether their communication backfires and sends it higher (again).
This week’s video will help you prepare for the upcoming events and provide insights into how you could possibly trade them as well.
Highlights of the video:
00:05 – Current Baseline
01:38 – Baseline expectations for the upcoming risk event
04:59 – Sentiment Shifts & Trade Plan
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