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Free AccessECB-Fed Divergence Remains Evident
Asia-Pac participants were seemingly happy to buy Monday's USD pullback with the move extending ahead of London hours, leaving EUR/USD -20 pips at $1.1899. A reminder that EUR/USD failed to break through Friday's low on Monday, before rebounding as risk appetite recovered as we moved through the European morning into the NY session.
- Below the aforementioned Friday/Monday low ($1.1848) focus would fall on $1.1837, a Fibonacci retracement, with any sustained break there opening up $1.1704, the Mar 31 low and a key support. On the upside, initial firm resistance is at $1.2006, the Jun 17 high.
- Fedspeak and comments from ECB President Lagarde headlined on Monday, underscoring the divergence between the two central banks, with Lagarde telling a committee within the European Parliament that the ECB has not reached the lower bound in interest rates (as a reminder, ECB chief economist Lane also presented a dovish message on Friday).
- Comments from Fed officials (headlined by Chair Powell) and various ECB speakers (Lane, Schnabel & Rehn) headline the respective U.S. & European dockets on Tuesday, and could further underscore the differing outlooks at the two central banks.
- There isn't much in the way of nearby option expiries to worry about for the pair at today's 10AM NY cut, with the nearest notable expiries having a strike of $1.2175. Thursday's 10AM NY cut presents some more interesting expiries (at least vs. current spot levels), with $1.8bn of $1.1800 strikes set to roll off alongside $1.4bn of $1.1920-25 strikes.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.