The EURUSD Enters Bearish Consolidation Zone Amid Dovish ECB Tone

The EURUSD slips into bearish consolidation zone

ECB's Isabel Schnabel, who has been one of the most hawkish voices during the bank's latest monetary policy tightening campaign, started to sound dovish this week. Schnabel said that inflation is slowing at a 'remarkable' pace. The 10-year bund yield melted to 2.23% level – last seen back in June.  

Yes, but Schnabel also said that officials 'have been surprised many times in both directions'. But traders are now set to sell the euro on dovish ECB expectations until inflation proves the contrary. The EURUSD slipped below 1.08 and to the 100-DMA, where it found some support. Following yesterday's selloff below the major 38.2% Fibonacci retracement, the pair is now in the bearish consolidation zone, with a strengthening bearish momentum that hints that the selloff could continue to 1.07/1.0730. Note that the market could absorb a further selloff at the current levels as the RSI is now at a mid-range: we are far from oversold conditions.  

Gold sees support near the $2000 per ounce as falling US yields and fading appetite for equities continue to push capital into the precious metal. 

Crude oil remains sold in a lower-highs-lower-lows pattern that paves the way for a further fall to the $70pb target, and China is not happy because Moody's cut its outlook for the Chinese sovereign bonds to negative warning that the country's usage of fiscal stimulus to support local governments and its spiraling property downturn pose risks to its economy. The Chinese CSI 300 fell to the lowest levels in almost 5 years, and nothing helps to undo the damage that government crackdowns and the COVID-zero policy have inflicted on investor confidence. China's stimulus measures brought Moody's to cut its sovereign debt outlook but couldn't bring investors or homebuyers back to the market.