ECB governing council members reiterated a lack of urgency to cut interest rates despite improved wage growth data. Lack of bullish euro drivers suggest vulnerability
However, Europe is not in the enviable position the US finds itself in. The world’s largest economy has outperformedexpectations, maintains a tight labour market, and the consumer appears healthy on the surface at least. Europe, on the other hand, has narrowly avoided a technical recession on multiple occasions, saved by the narrowest of margins as quarterly GDP growth oscillates around zero.
The weekly EUR/USD chart shows a notable rejection of the prior weekly low of 1.0724 – a level that has supported prices multiples times in the past. The pair is also on track to post a weekly recovery after bearish price action showed signs of slowing down in the prior two weeks with very thin candle bodies.It is among this backdrop that daily price action provides an indication that shorter-term bullish momentum may be waning.
Thursday’s swing high pulled back, leaving an extended upper wick in full view. On Friday, the daily candle revealed a doji – suggesting a slowdown in prior momentum. The yen has depreciated against most majors, with most of the focus onand the 150 marker as the finance ministry has reiterated its displeasure with the sharp depreciation of the local currency.
First up, Japanese inflation data could impact the yen even further should inflation follow the recent trend lower – raising doubts around one of the Bank of Japan’s two conditions for policy normalisation. Potentially bullish for EUR/JPY but this is fraught with complexity as the Japanese finance ministry could deploy the use of FX intervention at any time.
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