Two trades to watch: EUR/USD, Oil

Energy
Fiona Cincotta
By :  ,  Market Analyst

EUR/USD rises ahead of EZ CPI, USD ADP payrolls

 

EUR/USD settled 0.2% higher in the previous session after German inflation rose to an almost 50-year high and despite eurozone economic sentiment falling by more than expected as the fallout from the Russian war continues to take its toll on households and companies in the euro area.

Falling gas prices in Europe are helping to ease recession fears.

Attention now turns to eurozone inflation data which is expected to rise to a record 9% YoY in August, up from 8.9% in July, as energy and food prices continued to rise.

Hot inflation mounts pressure on the ECB to hike interest rates by 0.75% at the monetary policy meeting next week.

Meanwhile, the USD is falling amid an improved market mood and as yields edge lower. Today US ADP data is expected to show 200k private sector jobs added in August. A strong report could boost expectations of a strong NFP on Friday, potentially lifting the USD.

Where next for EUR/USD?

 

EUR/USD has been trending lower, creating a series of lower highs and lower lows. The price hit a 2022 low of 0.99.

The price has pushed back above 1.00, which, combined with the bullish crossover on the MACD, keeps bulls hopeful of further upside.

Buyers need to retake 1.0100, the weekly high, and 20 sma to expose the 50 sma at 1.0190 and bring 1.0275, the late July high, into focus.

On the flip side, EUR/USD trades below the 20 & 50 sma, keeping sellers hopeful of further downside. Should bulls fail to defend the parity, sellers will look towards 0.99, the 2022 low, to extend the bearish trend.

 

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Oil rises but is set for monthly declines

Oil is heading for a third straight month of losses, marking the longest losing run in over two years.

The prospect of slower global growth as central banks raise interest rates, and China continues with its zero tolerance to COVID has dragged on oil prices.

Yesterday reports that the US and Iran have agreed on the nuclear deal revival also hit oil prices, although these reports remain unconfirmed. The prospect of Iranian oil sanctions being lifted pulled oil 5% lower.

Saudi Arabia has floated the idea of cutting oil output. The next OPEC+ meeting is on September 5th.

EIA stockpile data is due later today.

Where next for oil prices?

Failure to retake the 50 sma and the receding bullish bias on the MACD supports further downside. Currently, the prices trades caught between the 20 & 50 sma.

A break below the 20 sma could see sellers test 88.50, the mid-July low. A break below here opens the door to 85.00, the August low.

Should the bulls successfully defend the 20 sma, buyers will look for a break above the 50 sma at 96.30 and the weekly high of 97.30 to bring 100 back into target.

 

 

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Related tags: Trade Ideas EUR USD Forex Oil

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