- The Nord Stream pipeline is expected to be back online on Saturday – 20% volume.
- The PPI shows a growing inflation problem in the Eurozone opening 75 basis points for the ECB.
- Bearish extension signals on the daily EUR/USD.
FUNDAMENTAL CONTEXT OF THE EURO
The euro found some support this Friday after it was announced that the Nord Stream 1 pipeline, which was closed for “maintenance” purposes, will restart operations in Europe – albeit at 20% ability. The morning started with German trade balance data showing signs of fatigue as high energy costs plague the region.
PPI data for the euro zone helped support the offers on the euro (increase falcon pressure), but the spotlight today is firmly on the United States via the Non-farm payroll (NFP) out later this afternoon. Estimates are at 300k but even a slight miss 200k should keep the American dollars stable as a 75 basis points rate hike from fed seems likely.
EUR/USD ECONOMIC CALENDAR
Source: DailyFX Economic Calendar
ECB RATE PROBABILITIES
Money markets are pointing the finger 70bps interest rate rise next week, which is significantly higher than prior market prices. We have seen several European Central Bank (ECB) officials favor front-loading, leading to the current aggressive outlook that likely stems from the Jackson Hole economics symposium. Inflation is now the main objective of central banks and the ECB finally opened its eyes after lagging the curve for a while. It is a difficult time for the ECB as the winter months approach and it calls for a recession are highly probable. The ECB is obviously aware of this but must take the necessary measures to curb inflation while pushing the region into recession territory (but not too far).
EUR/USD DAILY CHART
Chart prepared by Warren Venketas, GI
Technically, the EUR/USD the daily chart above contains some interesting indications. The first area of focus comes from yesterday’s confirmation just below the bear flag graphic template (blue) which traditionally points to a bearish continuation exposing the 0.9854 December 2002 swing low. In support of a new downward move, I highlighted a possible candlestick pattern inside the bar (yellow) with technical analysis theory suggesting a bearish continuation if the candle closes in this manner.
- 0.9854 (remember low from December 2002)
- 0.9685 (October 2002 low)
INDECISION SHOWN BY IG CUSTOMER SENTIMENT
The IGCS shows that retail traders are currently LONG on EUR/USDwith 69% of traders currently holding long positions (as of today). We at DailyFX generally take a contrarian view of crowd sentiment, however, recent shifts in long and short positions have resulted in a mixed bias.
Contact and follow Warren on Twitter: @Wenketas
The article is in French
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