Euro at Crossroads as ECB Rate Hike Looms While Crude Ponders China’s Growth Outlook

Euro at Crossroads as ECB Rate Hike Looms While Crude Ponders China’s Growth Outlook

Euro, EUR/USD, US Dollar, Crude Oil, China, OPEC+, USD/JPY – Talking Points

  • The Euro has firmed ahead as the US Dollar stood aside today
  • Crude oil contemplates supply versus demand issues amid uncertainty
  • The ECB are expected to hike on Thursday. Will tighter policy lift EUR/USD?

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EUR/USD held onto an overnight rally as it attempts to overcome 0.9900 ahead of the European Central Bank rate decision on Thursday.

The bank is expected to raise rates by 75 basis points to rein in red hot inflation that was revealed to be 9.9% year-on-year last week.

Treasury yields are steady as is the US Dollar through the Asian session. USD/JPY has held overnight gains as the market weighs up Bank of Japan intervention possibilities.

Crude oil has consolidated again through the Asian session on Tuesday as growth concerns continue to be weighed against lower production output from OPEC+ oil exporting nations.

The WTI futures contract is trading just under US$ 85 bbl while the Brent contract is near US$ 93.50 bbl.

The growth outlook for China is under cloud in the aftermath of President Xi Jinping’s changes to the leadership of the Communist Party. The most senior roles are now occupied by his loyalists that are in place to support his policies.

These policies include a zero-case Covid-19 approach and a regulatory environment that has seen crack downs on several industries. Chinese technology, property and gaming sectors have been especially targeted under the shared prosperity agenda.

Chinese stocks listed in the US hit a 9-year low after a 14.43% sell off in the Nasdaq Golden Dragon China Index. There are 65 companies that make up the index. USD/CNY traded above 7.300 for the first time since the unit traded in 2010.

The rest of Wall Street finished in the green despite disappointing PMI readings. The upbeat mood fed into a positive day for all the main equity indices in Asia. Futures are implying a neutral start to the North American cash session.

The Australian government will reveal their budget shortly and in light of the debacle that engulfed the UK government, few surprises are expected.

Later today the market will see earnings results from several more companies. Of particular interest will be the results from Apple, Microsoft, Ford Motor, Credit Suisse, Airbus, Alphabet, Amazon, Boeing, Caterpillar, Vale, Visa and Volkswagen.

The US will see some consumer confidence data.

The full economic calendar can be viewed here.

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WTI appears to be consolidating with the price criss-crossing several short-term simple moving averages (SMA).

The 55-day SMA is currently just above 87.00 and if the clears above there it will also be above the 10- and 21- SMAs which might see bullish momentum evolve.

Resistance could be at the break points near 90.50 or further up at the recent peak of 93.64.

On the downside, support may lie at the recnt low and break point of 81.20.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for

Please contact Daniel via @DanMcCathyFX on Twitter

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