Christine Lagarde gives a boost to EUR/USD

Over the weekend, ECB President Christine Lagarde blogged about monetary policy in the Euro Area. The usually dovish-leaning Lagarde summarized her opinion by noting that because the inflation outlook has shifted notably upward, she expects net purchases under the Asset Purchase Plan to end very early in the third quarter (to be announced at the June ECB meeting?). She added that this would allow the ECB to lift rates at the July meeting and likely to exit negative interest rates by the end of the third quarter (September meeting?). After that, the ECB would bring interest rates in line with a neutral rate based on the medium-term outlook of inflation. In addition to Christine Lagarde’s comments, the German Ifo Business Climate for May released today was better than expected at 93, vs 91.4 expected and 91.9 in April. The current conditions component was much stronger at 99.5 vs 97.3 prior while the expectations component was similar at 86.9 vs 86.8 in April.

On a daily timeframe, EUR/USD had been trading lower in an orderly downward sloping channel since May 2021, when the pair reached a higher of 1.2262. However, on April 22^nd, EUR/USD broke aggressively below the bottom trendline of the channel, near 1.0753, and fell within 9 pips of the 2017 lows at 1.0340 on May 13^th. Notice that the RSI was diverging with price as EUR/USD tested the 2017 lows, a sign that the pair may have been ready to move higher. Since then, the pair has bounced and is currently retesting the bottom trendline of the long-term channel.

Source: Tradingview, Stone X

On a 240-minute timeframe, EUR/USD has broken above the 38.2% Fibonacci retracement from the highs of March 31^st to the lows of May 13^th at 1.0668 and is testing horizontal resistance, the bottom, downward sloping trendline of the long-term channel, and the psychological round number resistance at 1.0700. Above there, price can run to a confluence of resistance between the April 14^th lows at 1.0757 and the 50% retracement from the above-mentioned timeframe at 1.0766. The next level of resistance is the 50 Day Moving Average near 1.0772. However, notice on the shorter timeframe that the RSI is in overbought territory, an indication price may be ready to pullback. Horizontal support sits below at 1.0683 and 1.0506. Below there, price can fall to the May 13^th lows of 1.0349.

Source: Tradingview, Stone X

With Christine Lagarde laying the groundwork for upcoming ECB rate hikes, EUR/USD has continued its recent bid higher. Throw in the better than expected German Ifo, and EUR/USD has rallied over 100 pips on the day. Can it continue? It will if the pair can break through 1.0700 and the RSI on the 240-minute timeframe can unwind into neutral territory!

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% 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. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.