CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

EURUSD at two month low on central bank divergence

Article By: ,  Senior Market Analyst
June 18, 2021 10:44 AM

EUR/USD is extending losses for a third straight session. The pair trades at its lowest level in two months on a post Fed hangover and on news that the Fed also started taper talk - highlighting the growing gap between the Fed and the ECB. 

The Fed’s Bullard confirmed that FOMC Chair Jerome Powell officially kicked off taper talk at the latest FOMC meeting. 

This update comes after the Fed also surprised the market with a hawkish shift in the same June meeting, pointing to two interest rate hikes in 2023, when the meeting before nothing was expected until 2024. 

After weeks even months of reassurance that inflation was transitory, the Fed is ramping up its hawkish stance pretty quickly. This stands in sharp contrast to the ECB’s position.  

In its latest meeting the ECB was surprisingly Dovish, keeping its assets purchases at March’s elevated level. The ECB was clear that it was too soon to start talking about reining in monetary policy. 

Draghi, ex ECB President and Italian Prime Minister also weighed into the debate saying that “the case for monetary and fiscal expansion remains compelling”. 

So, with the Fed firing the taper talk gun and the ECB staying firmly dovish, circumstances favour EUR/USD bears. 

What is the ECB 

Where next for EUR/USD? 

EUR/USD trades at 2-month lows after three straight days of declines. The 50 sma on the 4 hour chart formed a death cross, crossing below the 200 sma in a bearish signal. 

The RSI is showing deeply oversold conditions so caution should be taken before placing fresh shorts. A move higher or at the very least some consolidation around this level could be expected before further declines. What’s not so clear is the timing here, RSI conditions can remain in the red for something but not forever! 

Immediate support is seen at 1.1860 a level which offered support in early April. A breakthrough here could open the door to 1.1825 the April 5 high before 1.1785 comes into play the high April 1. 

Any attempt at a recovery would need to break through resistance at 1.1890 yesterday’s low, ahead of 1.1920 and 1.20 the psychological level. A move above here could go some way to negating the near term down trend. 

 

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024