Selling EUR/USD at MAs After the Retrace Higher
EUR/USD turned bearish at the beginning of last month, as US dollar (USD) buyers started to emerge. As a result, the pair reached its lowest point above 1.06 last week. On the H4 chart, moving averages have been acting as resistance, keeping the downtrend consistent. Traders have been selling when the price retraces higher and reaches these levels. Last week, on Thursday, there was a bullish reversal that caused the pair to move above the 50 SMA.
However, the climb was halted by the 100 SMA, indicated by the green line, and the downtrend resumed once again. Today though, we are seeing another retrace higher as US ISM services miss expectations while ECB members are still sounding hawkish. But, the climb has stopped at the 50 SMA (yellow) and we decided to open a sell EUR/USD signal since the main trend is still bearish and markets are uncertain whether the FED will pause this month or continue hiking interest rates.
Comments from the ECB President Lagarde
- No clear evidence that underlying inflation has peaked
- Price pressures remain strong
- Underlying inflationary pressures remain high
- Wages pressures have strengthened further
- Decisions will continue to be based on incoming data
- Our rate hikes are being transmitted forcefully to financing conditions
- Full effects of our monetary policy measures are starting to materialize
- Effects of our policy can be expected to strengthen in coming years
There’s an 88% chance of a hike priced in for the June 15 meeting and I don’t see any reason to fade that.
Comments from the German ECB Member Nagel
- Several more rate hikes are still necessary
- Not certain rates will peak this summer
- Put rate must be held until there is no doubt that inflation is returning to 2% in near term
- Underlying price pressure remain far too high, showing little sign of abating
- Cautiously optimistic about German growth prospects over the rest of the year
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