BUZZ-COMMENT-EUR/USD has not only slid because of the ECB/Fed gap

Reuters · 09/15/2023 07:50
BUZZ-COMMENT-EUR/USD has only slid because of the ECB/Fed gap


- EUR/USD has only slid because of differences in central bank policy rates between the European Central Bank and the Federal Reserve. The bearish daily chart and September seasonality are other factors contributing to its weakness.

Traders cheered the expected end of ECB rate hikes that have raised borrowing costs from minus 0.5% to 4.0% in just over a year. That sent euro zone government bond yields tumbling, the euro down and stocks .STOXX higher. Even if the ECB does hike, its policy rates will remain well below those of the Fed for the foreseeable future.

The daily EUR/USD technical chart is flashing red, and spot is in danger of a bigger collapse to a 1.0482 2023 low posted back in January. On Thursday, the market crashed through the 1.0669 Fibo, a 76.4% retrace of the 1.0482 to 1.1276 (2023) EBS rise, to finish the session well below it.

EUR/USD's performance for each September since 2000 shows it has dropped in 14 of the last 23 years, including the last six, highlighting a possible in-built structural downside bias. Related comment.

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(Martin Miller is a Reuters market analyst. The views expressed are his own)

((martin.miller@thomsonreuters.com))