EURO, EUR/USD, US Dollar, ECB, BOE, CRUDE OIL – Talking Points
- The Euro has held the high ground after the ECB turned more hawkish
- Equity and soft commodity markets have seen massive price swings
- Crude oil remains highly desired. Will energy prices undermine EUR/USD?
The Euro has continued on from yesterday’s surge above 1.14 and is threatening to make a 3-month high against the US Dollar. The European Central Bank (ECB) got the party started with a surprisingly hawkish stance after their monetary policy meeting yesterday.
President of the ECB Christine Lagarde said that there was unanimous concern across the board around high inflation.
The ECB pivot toward tightening came after the Banks of England had raised rates by 25 basis points to 0.50%. This had the US Dollar on the back foot prior to the ECB meeting. The Asian session has seen a continuation of USD weakness against all G-10 currencies, with EUR being the best performer.
All this hawkishness has pushed G-10 government yields higher, with the US 2-year looking to punch above 1.20% again. The Japanese (JGB) 10-year note traded above 0.20% for the first time since 2016. The UK’s 10-year Gilts are now yielding 1.38%, the most since early 2019.
It has also been a wild ride for equities, with the Wall Street cash session getting crushed in the fallout following disappointing Q4 results from Meta Platforms Inc (Facebook). The Nasdaq closed down 3.74%.
After the North American close, Amazon.com Inc reported earnings that surprised to the upside and futures markets have the Nasdaq recovering over 2% as we go to print. The good vibes infiltrated APAC equity markets that were open, as they were mostly traded slightly in the green.
Gold has recovered from an overnight sell off, comfortably trading around 1,806 in Asia today, predominately on a soft USD.
Crude oil continues to march north, trading at its highest level since 2014. Ongoing concerns around the Ukraine situation, Middle East drone strikes and doubts that OPEC+ will be able to deliver on planned output increases have underpinned oil.
Additionally, Japan’s Prime Minister Fumio Kishida announced overnight public appreciation for “secure” supply from Saudi Arabia. This may have added to concerns about the availability of black gold on the free market.
Other energy commodities and the entire metal complex are all slightly higher to varying degrees today.
Soft commodities have had an extraordinarily high burst of volatility. Coffee went through the roof and cotton is also a lot higher. Corn, soybeans and wheat have been smashed lower however.
All this volatility is ahead of US nonfarm payrolls data today. A Bloomberg survey is anticipating 125k jobs were added in January. An unexpected number could see more wild swings across markets.
EUR/USD Technical Analysis
The break below the ascending trend line has been rejected by the EUR/USD market in an aggressive move.
At the nadir of the sell-off, a bullish spinning top candlestick can be observed.
Resistance could be offered at the previous highs and pivots points of 1.1483, 1.15133, 1.15245 and 1.16089.
On the downside, support might be at the pivot points of 1.13830, 1.13691, 1.12738, 1.12347, 1.12219, 1.11861, 1.11682 and 1.11215
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter