March 2, 2022 15:23:02
The euro didn’t receive a lot of love from a record inflation print this morning. The region looks to be heading into potential stagflation – where growth slows while price pressures increase ever higher. Economists reckon headline CPI could rise another 1% from here, towards 7% as today’s reading was obviously taken before the exploding energy prices we’ve seen since the Ukraine conflict.
ECB rate hike bets have been paired into next week’s meeting with around 35bps cut from the 50bps priced in before the geopolitical crisis. Developments around the war will obviously drive euro direction in the near term.
The aussie has been well insulated from the conflict in Europe, even as risk sentiment has tumbled. Of course, AUD is a commodity-linked currency so is enjoying considerable fundamental support from soaring energy and agricultural prices. Australia is one of the top six global wheat exporters and the world’s leading LNG exporter.
EUR/AUD touches long-term low at 1.5252
This pair looks to have formed a double top reversal pattern, though if we’re honest, there’s not really a defined long-term bullish trend. The second peak will also usually be slightly below the first rounded top, but these patterns are rarely perfect.
After topping close to 1.62 in December and then retracing, buyers took us back up to a marginally higher top at 1.6225. Again, this was short lived, and sellers have been in charge ever since, enjoying eleven straight down days, and counting.
Prices plunged through support at the October low at 1.5354. The February trough around 1.5252/57 offers next support, along with a January 2018 support zone. The measured move of the double top reversal pattern would take us down to 1.50.
The pair is severely oversold on several daily momentum indicators and oscillators. Resistance is 1.5354 with a move towards 1.55 needed to slow the strong bearish momentum.
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