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Market Watch EUR/USD: Euro Gains, Dollar Weakness

EUR/USD Euro Gains Dollar Weakness

EUR/USD reflects upbeat ZEW sentiment: Euro gains, Dollar weakness. Anticipating US CPI data, the market awaits FOMC and ECB decisions.

  • German Economic Sentiment Hits Highest Point Since March, Boosting Euro (EUR)
  • EUR/USD Fluctuates Around 1.0800 Mark; US CPI Data Awaited in Today’s Trading Session

In a positive turn for the German and Euro Area economy, the latest ZEW report has revealed a notable improvement in economic sentiment, reaching its highest level since March. German and Euro Area readings surpassed market forecasts, offering a slightly more optimistic outlook. Despite a marginal improvement in German conditions from November, they linger near historically low levels over the past five years.

As the Euro (EUR) and US Dollar (USD) engage in a tug of war, EUR/USD is currently testing the key level of 1.0800. Euro strength and US dollar weakness are driving this movement, and these factors are susceptible to rapid changes in thin market conditions. Notably, German economic sentiment reaching multi-month highs contributes to the strength of the Euro.

Market Watch EUR/USD: Euro Gains, Dollar Weakness

Investors anticipate the release of the upcoming US inflation report, with expectations that the core reading (y/y) will remain stable at 4%. In comparison, the annual headline reading may experience a slight decrease of 0.1% to 3.1%. Analysts expect the upcoming Federal Open Market Committee (FOMC) meeting on Wednesday and the European Central Bank (ECB) policy decision on Thursday to temper the impact of this report on the market. Post-release press conferences may uncover insights into conditions that could prompt potential interest rate cuts, although both central banks maintain existing policies.

The EUR/USD will likely hold its current trading range around 1.0800, with support levels at 1.0724 and 1.0716. At the same time, resistance is identified at 1.0824 and 1.0866, representing the 200-day simple moving average and the 23.6% Fibonacci retracement level, respectively.

As indicated by IG Retail trader data, market sentiment shows that 56.90% of traders are net-long, with the long-to-short ratio at 1.32 to 1. The net-long traders have increased by 2.78% compared to yesterday and 14.25% from last week. Meanwhile, net-short traders have increased by 4.72% since yesterday but decreased by 13.39% compared to the previous week.

In the daily timeframe, there is a neutral stance with no significant changes in longs, shorts, and open interest. Weekly, there is a notable increase in long positions by 16%, a decrease in short positions by 16%, and no change in open interest. Overall, the sentiment appears mixed, reflecting the uncertainty in the current market conditions.

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