hawkish remarks

EUR: Not much impact from post-meeting ECB communication The week after an ECB meeting is generally used by members to fine-tune the Bank’s message, although we must note that the past two instances have seen somewhat limited impact from this post-meeting communication. That probably boils down to President Lagarde having gained market traction after some communication hiccups, and markets now having higher confidence on the press conference communication as opposed to post-meeting communication. Yesterday, we heard some dovish comments by French Governor Villeroy, who said the ECB has completed most of its hiking cycle and further hikes would be less important and highly data-dependent. There were also remarks from the hawkish side of the spectrum, with Muller and Vujcic pointing to sticky core inflation and accepting hard landings as part of the inflation battle. Today, we’ll hear from two prominent hawkish speakers, Schnabel and Nagel, as well as from Slovakia’s Kazimir (also a hawk). Still, expect the impact on EUR/USD to be secondary compared to Powell’s testimony: we see some downside risks for the pair today, which could move back to the 1.0850/1.0900 area. Elsewhere, EUR/SEK touched record highs yesterday. This is hardly good news for the Riksbank a week before a pivotal policy meeting where the need to re-establish a united hawkish front to fight SEK weakness will need to be weighed against the negative implications for a the fragile real estate market. Here is our full Riksbank preview and EUR/SEK update.

The test of 1.0975 on Tuesday afternoon, coinciding with the time when the MACD line was in the overbought area, prompted a sell signal that resulted in a price decrease of around 30 pips. Lending data in the eurozone and speeches from ECB members may maintain demand for euro and continue its upward trend.   Good indicators on M3 money supply aggregate and private sector lending volume in the eurozone may also lead to a new surge in prices. Similarly, hawkish remarks by ECB President Christine Lagarde, pointing out potential further aggressive actions on the central bank's balance sheet, will also strengthen demand for euro.   For long positions: Buy when euro hits 1.0958 (green line on the chart) and take profit at the price of 1.0995. An upward movement will continue if lending in the eurozone remains at a normal level, allowing the ECB to raise rates without problems. However, when buying, traders should make sure that the MACD line lies above zero or rises from it. Euro can also be bought after two consecutive price tests of 1.0935, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0958 and 1.0995.   For short positions: Sell when euro reaches 1.0935 (red line on the chart) and take profit at the price of 1.0903. Pressure will return in case of poor statistics from the eurozone. However, when selling, traders should make sure that the MACD line lies below zero or drops down from it. Euro can also be sold after two consecutive price tests of 1.0958, but the MACD line should be in the overbought area as only by that will the market reverse to 1.0935 and 1.0903.     What's on the chart: Thin green line - entry price at which you can buy EUR/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell EUR/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely. MACD line- it is important to be guided by overbought and oversold areas when entering the market     Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.    

Germany to release CPI on Wednesday, Eurozone on Thursday US consumer confidence and jobs data disappoint   The euro’s mini-rally has run out of steam. EUR/USD climbed 0.80% over the past two days but is trading in negative territory on Wednesday. In the European session, the euro is trading at 1.0867, down 0.11%. The markets will be keeping a close eye on European inflation releases today and Thursday. Germany releases the July CPI report later today, with a consensus estimate of 6.0%, compared to 6.2% in July. The once-formidable German juggernaut is in trouble and inflation remains high. The eurozone releases July CPI on Thursday, which is expected to drop from 5.3% to 5.1%. The ECB meets next on September 14th and ECB President Lagarde may have signalled that another rate hike is coming. Lagarde attended the Jackson Hole summit last week and said that interest rates would remain high “as long as necessary” in order to bring inflation back to the ECB’s 2% target. Lagarde’s hawkish remarks were more hawkish than her comments at the July meeting, where she said that ECB policy makers had an “open mind” about the September decision.   There’s no arguing that eurozone inflation remains too high, but the argument against raising rates even higher is that the eurozone economy is not in great shape, and nine straight rate hikes from the ECB have cooled economic growth. Further hikes could tip the economy into a recession, which means that the ECB has its work cut out in deciding whether to raise rates again or take a pause in September. The Federal Reserve is widely expected to hold rates at next week’s meeting, and disappointing data on Tuesday may have cemented a pause. The Conference Board Consumer Confidence Index fell sharply to 106.1 in July, compared to 116.0 in August, marking a two-year low. As well, JOLTS Job Openings slowed to 8.82 million in July, down from 9.16 million in June and well off the estimate of 9.46 million. This was the sixth decline in the past seven months, a sign that the resilient US labour market is showing cracks.   EUR/USD Technical EUR/USD is putting strong pressure on resistance at 1.0896. The next resistance line is 1.0996 1.0831 and 1.0731 are providing support