Margin trading products are complex instruments and come with a high risk of losing money rapidly due to leverage. 85.3% of retail investor accounts lose money when trading on margin with this provider. You should consider whether you understand how margin trading works and whether you can afford to take the high risk of losing your money.

EUR

FX trader - It's EURs time to shine

Mar 6, 2023
It’s the EUR’s time to shine but despite the moves and news, there is client interest to fade the rally, with clients firmly net short EURs across the G10 pairs. The countertrend traders are out in force.

One focal point on the session was comments from ECB member Holzmann – the Austrian central bank gov – who becomes a voter in May. A known hawk, he talked about a desire to see four 50bp hikes in a row, which could see the market price a terminal ECB rate of 4.5%. As a result, we’ve seen good selling in the 2-year part of the German bond curve and ECB rates pricing sits at 3.96% for year-end.

A 50bp hike from the ECB next week (16 March) seems like a done deal, but for now, rate differentials have moved in the EURs favour, while EU Nat gas prices falling a further 6% to E42 MWh won’t have hurt confidence to the region either. EURUSD has traded to 1.0964, before finding sellers into the 1 Feb high – the bulls will want this taken out, but price is above the 5-day EMA and price is printing higher lows (on the daily).

EURUSD daily

Preview

A closing break of 1.0692 sets EURUSD up for a big test of the 38.2 fibo (of the 1.1032 to 1.0533) and 50-day MA at 1.0724. Whether we get there in the short-term falls on how the market digests Jay Powell’s speech in the session ahead.

With 31bp of hikes priced into the US rates market, the door is open to a 50bp hike at the 22 March FOMC meeting - a premium is therefore baked in that we see a hot US NFP and CPI print, but given the barrier is still high for the bank to want to step up to 50bp, this pricing should limit USD buying to an extent.

Preview

On the day it’s the AUD which has seen the big percentage change, following weakness in the CNH (offshore Chinese yuan). The move lower in AUD is not reflective of traders positioning for today’s RBA meeting (14:30 AEDT) but maintaining its China proxy status. EURAUD is starting to look overbought, but on the day we’ve seen solid range expansion and the FX cross eyes big levels in the form of the December highs of 1.5920 – one for the scalpers to have on the radar, and as well as those who see this being close to a top of a range play.

EURJPY is another that the macro traders are long as a central bank divergence trade – on the day we’ve seen a bullish outside day reversal, so buy-stop orders above 145.60 will be eyed up for a momentum play. The BoJ meeting this week shouldn’t worry JPY shorts too intently and while it's Kuroda’s last meeting at the helm, it seems very unlikely he’ll go out with a bang.

Some big event risks ahead – the EUR is finding some love, but can it continue?

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients. Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.