Timing is everything!

While the general direction for the US Fed and the ECB are similar, their timelines differ greatly!

On the US Fed (USD) front, we are days away from the next FOMC meeting (4th May 2022) where market participants are expecting a 50 bps hike. On the ECB (EUR) front, the ECB is expected to taper its asset purchase program by early Q3, before it will consider any rate hikes.

The difference in timelines of the Fed and ECB could provide some interesting hints on where the EURUSD is heading in the short term. With the Dollar being the first mover here, we expect strength in the dollar to drive the EURUSD lower over the short term before the ECB firms up its hike schedule.





The EURUSD pair is also trading just below the 7- year support level. Zooming in on a shorter timeframe, we also spot a breakout and retest at this level, suggesting the move has begun.

Entry at 1.08070, stop above 1.12080. Targets are 1.06760 and 1.03835.

Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.