empty
 
 

Forex Analysis & Reviews: EUR/USD. Results of the week. New price breaks and gloomy prospects
time 25.09.2022 03:46 PM
time Relevance up to, 25.09.2022 01:58 PM

The euro-dollar pair ended the trading week at 0.9689. This is another low of the year and at the same time a 20-year price anti-record. The large-scale downward trend, which actually began in June last year, has developed: the EUR/USD bears are moving further and further away from the parity level, which has "transformed" from a support level to a resistance level. Take a look at the monthly chart of the pair: the price fluctuated in the range of 17-23 figures in 2021, but in early summer it began to actively decline, rarely interrupted by corrective pullbacks. This year, the downward trend has intensified. For nine months, the pair has collapsed by almost 2,000 points, having overcome the key support level of 1.0000. More recently, such a scenario looked fantastic, but today it is a "harsh reality".

This image is no longer relevant

After traders gained a foothold under the parity level, a logical question emerged: where is the next price barrier comparable to the significance of the 1.0000 mark? Since mid-July, EUR/USD bears have been cautiously and gradually shifting the price range downwards, moving away from the parity zone. And the deeper traders "dive", the more concern about this grows – after all, no one wants to catch a "price bottom".

In this context, the 0.9500 target sounds most often. Actually, there is "just nothing" left before this mark, less than 200 points. It is likely that EUR/USD bears will be able to test this milestone for strength in October.

In general, most currency strategists of large banks voice two theses regarding the prospects of EUR/USD. Firstly, the downward trend has not exhausted its potential. The prevailing fundamental background contributes to a further decline in prices – both due to the strengthening of the dollar and due to the weakening of the euro. Secondly, the pair will at some point indicate a price bottom (here again, the 0.95 mark is most often mentioned), after which it will drift, demonstrating a sideways movement.

And yet, talking about long-term prospects is a thankless task. While the price benchmark in the form of the 0.9500 mark looks very plausible and realistic. I repeat, given the current fundamental background, the pair may reach this level of support in the foreseeable future, literally next month.

The EUR/USD downward trend is fueled by three "ingredients": the energy crisis, the Federal Reserve's hawkish attitude and anti-risk sentiment in the markets. The downward momentum that we observed at the end of the trading week is due to the fact that all these "ingredients" manifested themselves, provoking the corresponding reaction of traders.

Bloomberg published a resonant material that reflected the gloomy consequences of the energy crisis in Europe. It is reported that a significant increase in gas and electricity prices forced many European industrial enterprises to stop production. At the same time, some large concerns are considering the option of transferring production to another location. In particular, we are talking about the largest automobile plant Volkswagen. According to journalists, VW management has already warned top managers about the likelihood of transferring production from Germany and Eastern Europe to Southern Europe. In general, Bloomberg states that at the moment Europe pays 7 times more for gas than the United States, which underlines the crisis of competitiveness of the European region.

However, not everything is so rosy in the US too. The slowdown in economic growth is also being recorded in the US. By the way, additional pressure on EUR /USD was exerted by information that was published by The Wall Street Journal. It turned out that the strategic oil reserve of the United States has decreased to a 38-year low. And according to experts interviewed by journalists, this is a threat to the United States, due to the instability of fuel markets. The fact is that the US authorities conducted commodity interventions (about 155 million barrels of oil have been sold since April), which reduced retail gasoline prices from $5.10 per gallon to $3.6. But the flip side of the coin now greatly worries experts: according to them, the interventions have critically reduced strategic fuel reserves.

This image is no longer relevant

Such signals (both from Europe and from the US) increased the demand for a safe dollar and further weakened the euro, which was already in a depressed state. The results of the Fed's September meeting only completed the picture: the US central bank once again declared a hawkish course, despite the slowdown in economic growth and other "side effects" of tightening monetary policy.

Thus, in my opinion, at the moment there are all the prerequisites for the further development of the downward trend. Geopolitical tensions, the energy crisis, the hawkish Fed rate, the growth of anti-risk sentiment - all these factors simultaneously strengthen the position of a safe greenback and weaken the position of the single currency. Therefore, the price benchmark in the form of the 0.9500 mark looks quite realistic.

It is advisable to enter into short positions on upward corrective pullbacks. The bearish targets in the medium term are 0.9750 (with a rollback to the boundaries of the 98th figure), 0.9700 and 0.9650.

Irina Manzenko,
Analytical expert of InstaForex
© 2007-2023
EURUSD
Euro vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade

InstaForex analytical reviews will make you fully aware of market trends! Being an InstaForex client, you are provided with a large number of free services for efficient trading.

  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $1000 more!
    In February we raffle $1000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Powell's expected speech turned out to be uninformative. Overview of USD, NZD, AUD

The main event of Tuesday, and maybe the entire week, was the interview of Fed Chief Jerome Powell. As soon as he started talking, the markets began to rush, which

Kuvat Raharjo 22:46 2023-02-08 UTC+2

EURUSD and U.S. inflation to face a bumpy path

Markets hear what they want to hear. They found no direct link in Jerome Powell's speech between the strong January U.S. jobs report and the additional hike in the federal

Marek Petkovich 16:25 2023-02-08 UTC+2

EUR/USD. The report on German inflation growth may cause increased volatility.

At the end of a three-day southern marathon, the euro/dollar pair remained unchanged. While there is no longer any downward momentum, EUR/USD bulls do not yet have enough justification

Irina Manzenko 16:21 2023-02-08 UTC+2

In the UK, the cost of living crisis affects one in every four homes.

The situation in the UK is deteriorating, while stock indices in other nations are dealing well with yesterday's hawkish speech by Federal Reserve Chairman Jerome Powell, who predicted that

Jakub Novak 15:13 2023-02-08 UTC+2

GBP/USD: Thursday outlook

On Thursday, February 9, parliamentary hearings on the Bank of England's monetary policy report will take place. Within the framework of these hearings, BoE Governor Andrew Bailey and several members

Irina Manzenko 14:41 2023-02-08 UTC+2

Central banks are concerned about stopping the decline in inflation.

The markets have recently gotten used to the reality that inflation is falling. The UK stands out as the lone exception, where a fall in the consumer price index

Chin Zhao 12:45 2023-02-08 UTC+2

Central bank demand for gold hits record high, says WGC

Gold purchases by central banks in 2022 hit an all-time high, according to an updated study by the World Gold Council. Last week, the WGC released its latest Gold Demand

Irina Yanina 12:30 2023-02-08 UTC+2

Gold sees traces of market professionals

If an asset goes uphill too quickly, the risks of its sale increase dramatically. Typical examples are the euro and gold. From the levels of the September lows

Marek Petkovich 12:01 2023-02-08 UTC+2

Powell stresses the need for further interest rate hikes

Fed Chairman Jerome Powell held on to his view that interest rates should continue to rise in order to suppress inflation. He also suggested that borrowing costs could peak higher

Andrey Shevchenko 11:47 2023-02-08 UTC+2

Fed's recent actions could open up opportunities for investors

Fed Chairman Jerome Powell said that much of the inflation is pandemic-related. However, this is not true as the reason why inflation reached a 40-year high is that

Irina Yanina 11:08 2023-02-08 UTC+2
Can't speak right now?
Ask your question in the chat.