EUR/USD trades under the 200-Day SMA (1.1992) for first time since April since Federal Reserve officials predict two rate climbs for 2023, and speculation to get a consequential change in Fed policy will continue to keep the exchange rate under stress since Chairman Jerome Powell and Co. continue to increase their prognosis for the US market.
By comparison, the European Central Bank (ECB) seems to be in no hurry to change gears as"the Governing Council anticipates net purchases beneath the PEPP (pandemic crisis purchase programme) within the upcoming quarter to continue to be run in a higher rate than during the initial months of this calendar year," and it appears like the ECB will encourage the Euro Area during the rest of the year as Chief Economist Philip Lane insists that the central bank is"not prepared to move anywhere near tapering or something like that in the present time."
At a recent interview with Bloomberg TV, Lane highlighted that"in which the United States is now and in which the euro region is so distinct, both with respect to the point from the pandemic retrieval," together with the Governing Council member delivering a dovish forward advice amid"the simple fact that the inflation outlook remains rather subdued."
It appears like the ECB is on a preset course as Lane asserts it will be"a multi-year challenge" to attain its one and only mandate for price stability, and also the deviating avenues for fiscal policy imposes a bearish outlook for EUR/USD since the FOMC pledges to"give advance notice before announcing the decision to taper."
On the other hand, the current selloff in EUR/USD has spurred change in retail opinion, which imitates the price action from before this season, together with all the IG Client Sentiment report revealing 57.24% of dealers now net-long the set as the proportion of traders extended to brief stands in 1.34 to 1.
The amount of dealers net-long is 8.57% greater compared to yesterday and 58.65% higher from a week, whereas the amount of dealers net-short is 6.13percent lower compared to yesterday and 34.86% reduced from previous week. The leap in net-long place has generated a reverse in retail opinion as 39.98percent of dealers were net-long EUR/USD before the FOMC rate decision, although the decrease in net-short interest might be a purpose of profit-taking behaviour as the foreign exchange rate bounces back by a brand new monthly low (1.1885).
That said, it was seen if the decrease from the January high (1.2350) will prove to be a correction from the wider trend as opposed to an alteration in market behaviour as EUR/USD trades under the 200-Day SMA (1.1992) for the first time since April, but the change in retail opinion can coincide with a further decrease in the exchange rate such as the behaviour seen before this season.
At precisely the exact same time, looming improvements from the Relative Strength Indicator (RSI) can also throw a bearish outlook for EUR/USD when the index breaks under 30 and pushes to oversold territory for first time since February 2020.