EURUSD portrays pre-ECB consolidation amid cautious optimism

Traders prepare for this week’s big data/events while paring the latest moves ahead of the ECB monetary policy decision. In doing so, the traders remain cautiously optimistic amid hopes of witnessing an upward revision to the ECB’s inflation forecast and readiness to lift the rates. Adding strength to the slightly positive mood could be China’s another move to unleash housing market restrictions and defend the struggling sector. Additionally, softer details of the US Core Inflation, even if the top-line data have been strong, also allow the optimists to take a risk.

Elsewhere, strong Australian job numbers help AUDUSD to remain firmer, especially amid the risk-on mood, while USDJPY traces yields to print the first daily loss in three. Further, EURUSD reverses the previous day’s losses with mild gains ahead of the ECB whereas GBPUSD and USDCAD struggle for clear directions.

Prices of gold dropped for the third consecutive day but Crude Oil prints a five-day uptrend while poking the yearly high marked the previous day. That, the Wall Street closed mixed but the Asia-Pacific shared edge higher.

BTCUSD and ETHUSD print a three-day winning streak as market players gather positive signs for the Bitcoin and Ethereum ETF fillings.

Following are the latest moves of the key assets:

• Brent oil remains firmer at the highest level since November 2022, up 0.40% intraday to $92.70 by the press time.
• Gold price prints mild losses near $1,905 during a three-day losing streak, below the 200-EMA support at the latest.
• USD Index stays defensive around 104.70, posting mild losses of late.
• Wall Street closed mixed but the Asia-Pacific stocks edged higher. That said, equities in Europe and the UK print minor gains by the press time.
• BTCUSD and ETHUSD print mild gains around $26,300 and $1,620 as we write.

Traders prepare for ECB

A 14-month high US inflation of 3.7% YoY for August joined the US government’s budget surplus in August to underpin the US Dollar’s rally the previous day. Adding strength to the Greenback’s upside could be the US-China jitters after Beijing flagged security concerns with Apple to mark a tit-for-tat approach to the US Huawei episode.

However, the details of the Core CPI appear less impressive and hence prod the US Dollar buyers, especially when the markets expect a hawkish ECB outcome and seek more clues to justify the US soft-landing concerns.

Following that, the global rating agency Fitch downgraded the US economic forecasts and anticipated the world’s largest economy to slip into recession during early 2024, which in turn joined the early-day optimism to weigh on the US Dollar on Thursday.

That said, China’s Shenzhen announced easing of the house purchase restrictions, considered to be the strictest, offered additional strength to the market’s optimism and weighed on the USD.

The same joined strong Australian jobs report for August to propel the AUDUSD while downbeat Treasury bond yields allowed the USDJPY pair to snap a three-day uptrend.

Further, Oil price ignores IEA’s no change in 2023 and 2024 energy demand forecasts while rising for the fifth consecutive day, poking yearly high of late.

It should be noted that the physical buying ahead of the festive season and mixed concerns about the US economic growth joined the China-inspired optimism to underpin the Asia-Pacific optimism.

On a different page, optimism about the crypto ETF fillings and technical signals allow BTCUSD and ETHUSD to edge higher despite looming regulatory fears and industry wars with the US SEC.

• Strong buy: USDCAD
• Strong sell: ETHUSD, GBPUSD, Gold
• Buy: USD Index, Nasdaq, USDJPY
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

All eyes on ECB, US Retail Sales and Core PPI…

Traders brace for today’s European Central Bank (ECB) Monetary Policy Meeting announcements with hopes of witnessing a hawkish halt. Also likely to underpin the positive mood could be the hopes of witnessing mixed US data, including Retail Sales and the Core Producer Price Index (PPI), which in turn won’t help the Fed to defend the rate hike cycle.

It should be noted, however, that a disappointment via the ECB’s hesitance to defend the hawkish cycle, despite pausing the rate hikes, or President Christine Lagarde’s speech, the US Dollar may extend its upside momentum. Additionally, firmer US Retail Sales and PPI could also help the Greenback remain firmer even if the ECB prods the USD bulls.

Hence, the odds of witnessing the US Dollar’s upside and challenges for the riskier assets are high ahead of a likely busy day.

May the trading luck be with you!