empty
 
 

Forex Analysis & Reviews: EUR/USD. Overview for November 29. The ECB may launch a QT program in the coming months.
time 29.11.2022 02:19 AM
time Relevance up to, 30.11.2022 02:06 AM

This image is no longer relevant

On Monday, despite the near absence of news and events, the EUR/USD currency pair was trading higher. The growth started early in the day, much earlier than the only event of the day - Christine Lagarde's speech, and it should be noted immediately. As a result, this event was unable to have any impact on the market's mood. And the current atmosphere is unquestionably "bullish" and does not raise any concerns. As we've already stated, the expansion of the euro is wholly justified and logical from a technical standpoint. Now, every indicator on the 4-hour and 24-hour TF is visible. Therefore, conceptually, there are no issues with the European currency's growth. When we discuss macroeconomics as a foundation, it becomes a different issue. Since the market trades every day, the pair can grow perfectly well without significant newsworthy events or publications, as we have already stated. However, the euro has been expanding rapidly for almost a month, and such a sustained expansion has us scratching our heads. What foundation is the euro currently growing on?

Remember that, in theory, a few factors could account for the pair's current movement. For instance, we can state that the risk sentiment in the market is rising right now, but what does this mean, and why is it rising? It is very challenging to respond. Why, then, did traders suddenly start paying attention to risky currencies when the geopolitical situation in the world hasn't changed in any way over the past month? The foundation is the same way. Yes, the ECB rate is rising quickly, and starting next month, it may start to outpace the Fed rate in terms of growth. But is this one factor enough for the euro to rise by 750 points in less than a month? It is extremely difficult to refer to macroeconomic statistics as "supporting the euro" at all. The only theoretical support factor is anticipating a slowdown in the Fed's tightening pace. How much more will the euro currency appreciate based solely on this factor?

As we've already stated, it makes sense to trade for an increase while all indicators point upward. Any fundamental theory requires specific technical signals to support it. There is no need to try to predict the reversals or the future movement if there are none. The market may be closing out the short positions it has been building up for the past two years.

The ECB is getting ready to reduce its balance sheet.

The fundamental background is nonexistent during the first two trading days of the week. Christine Lagarde gave another speech on Monday, but this time she didn't offer any novel insights into the market. The market had no doubts about her assurance that rates would continue to be a crucial tool in the struggle against high inflation. In other words, as long as EU inflation remains sky-high, the ECB rate will rise, which the market did not doubt. Lagarde added that the topic of shrinking the ECB's balance sheet (the QT program) will be discussed in December, which should also cause a slight slowdown in the consumer price index. It's already in the news! Given that Lagarde's speech was quite late in the day on Monday, it hardly had any impact on the appreciation of the euro.

The ECB chief also noted that although it is unlikely to occur soon, the central bank's balance sheet reduction should go smoothly, and rates will eventually fall. The state of the economy, the labor market, wages, and inflation expectations will all be important factors. As you can see, traders continue to have formal reasons to purchase the euro from a foundational standpoint. Still, we believe that the current fundamental background needs to be sufficiently strong to cause the euro to increase by 750 points in a matter of weeks.

This image is no longer relevant

As of November 29, the euro/dollar currency pair's average volatility over the previous five trading days was 95 points, considered "high." So, on Tuesday, we anticipate the pair to fluctuate between 1.0332 and 1.0521 levels. The Heiken Ashi indicator's turning downward indicates a new phase of the corrective movement.

Nearest levels of support

S1 – 1.0376

S2 – 1.0254

S3 – 1.0132

Nearest levels of resistance

R1 – 1.0498

R2 – 1.0620

R3 – 1.0742

Trading Suggestions:

The EUR/USD pair is still above the moving average. Thus, until the Heiken Ashi indicator turns down, we should hold long positions with targets of 1.0498 and 1.0521. The price fixing below the moving average line with targets of 1.0254 and 1.0132 will cause sales to become significant.

Explanations of the illustrations:

Linear regression channels – help determine the current trend. The trend is strong if both are directed in the same direction.

The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now.

Murray levels are target levels for movements and corrections.

Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators.

The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.

Paolo Greco,
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

Pound: An ugly duckling in Forex

Numerous dovish signals from the Bank of England and a surprisingly strong U.S. jobs report for January dropped GBPUSD to a region of monthly lows. There is nothing worse

Marek Petkovich 09:41 2023-02-06 UTC+2

Markets halt rally due to strong US labor market data

Global markets were shocked once again as Friday's employment data in the US came markedly better than expected. The report said there is an increase of about 517,000 new jobs

Pati Gani 09:32 2023-02-06 UTC+2

GBP/USD. Overview for February 6, 2023

On Friday, the GBP/USD currency pair fell by around 200 points. As we've already mentioned, positive macroeconomic indicators from overseas led to the decline of the pound (or, rather

Paolo Greco 06:49 2023-02-06 UTC+2

EUR/USD. Overview for February 6, 2023

On Friday, the EUR/USD currency pair finally displayed a movement that could be characterized as reasonable and did not require decoding. Several significant reports that were released in the United

Paolo Greco 05:45 2023-02-06 UTC+2

EUR/USD. Preview of the week. Signals from the Fed, Lagarde's speech and important news from Germany

Not much important macroeconomic news this week. The ECB and the Fed will set the tone for trading, who are likely to evaluate the latest reports through the prism

Irina Manzenko 05:03 2023-02-06 UTC+2

EUR/USD. What did Nonfarm say?

Friday's report suggests that the Fed will remain moderately hawkish on the prospects for monetary tightening at its March meeting. We are talking about an almost guaranteed increase in interest

Irina Manzenko 22:57 2023-02-05 UTC+2

The euro sets a bad example

The European Central Bank was late to the party and is now trying to convince investors that it will be the last to leave. In other words

Marek Petkovich 13:02 2023-02-05 UTC+2

GBP/USD: brief results and expectations

The Bank of England raised its rate by 50 bps to 4%, the highest level since October 2008. However, the Bank forecasts that annual U.K. inflation will fall from

Jurij Tolin 12:59 2023-02-05 UTC+2

Analysis of the trading week of January 30–January 3 for the GBP/USD pair. COT report.

The GBP/USD currency pair has also begun a very strong decline this week. Despite its drop from about a month ago, we also anticipated a decline in the value

Paolo Greco 18:15 2023-02-04 UTC+2

Analysis of the trading week of January 30–February 3 for the EUR/USD pair.

The EUR/USD currency pair has attempted to maintain its recent upward trend once more this week, although, during the past two weeks, it has begun to noticeably drop. About

Paolo Greco 17:39 2023-02-04 UTC+2
Can't speak right now?
Ask your question in the chat.