EUR/USD – Bullish breakouts coming?

Lagarde comments trigger latest rally

The euro surged at the start of the week after ECB President Christine Lagarde laid out a very clear path for tightening in the coming months.

This is extremely out of character for Lagarde which perhaps highlights the urgency with which the ECB is now approaching the inflation problem.

From intentional ambiguity to a very specific path – a rate hike in July and an end to negative rates by the end of the third quarter – it’s a huge change from how the central bank has been in recent years.

The markets were already expecting the ECB to start hiking but this confirmation highlights how important it is to start doing so straight away. They’ve already dragged their feet but they must now avoid waiting too long once they acknowledge the problem.

The euro rallied strongly today, aided by a softer dollar in this particular pair, and if we get more of this kind of commentary in the coming weeks, it could go a lot further.

The pair has run into a little resistance today at 1.07, around the 200/233-period SMA band on the 4-hour chart. It has traded below this over the last few months and it’s capped multiple rallies in that time. A break above here could be significant.

Above here, 1.0850 is a very interesting level where the 61.8 fib intersects the top of the descending channel and the 55/89-day SMA band. A move above here may suggest a much bigger correction is on the cards.

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam