Forex Analysis & Reviews: EURUSD: Euro recovers bullish position
time 06.12.2022 06:45 PM
time Relevance up to, 11.12.2022 02:53 PM

The acceleration of business activity in the US services sector from the ISM sent EURUSD to a knockdown, but during the European trading session, the euro began to recover. This happened due to the growth in German manufacturing orders by 0.8%, which was better than Bloomberg's forecast of +0.1% MoM, and the statement of the European Central Bank Chief Economist Philip Lane that the inflation slowdown in November does not mean that the peak is over. It could come in 2023. It looks like the leading economy of the currency bloc is not feeling as bad as expected, and the ECB is not thinking of pausing in the process of tightening monetary policy.

Dynamics of production orders in Germany

This image is no longer relevant

Thus, positive statistics on the US strengthened the dollar, and on the currency bloc—the euro. The principle of "strong economy means strong currency" continues to work, although all these data have a local impact on the EURUSD dynamics. The fate of the main currency pair will be determined next week, by December 16. The release of data on US inflation and the Fed meeting will become a litmus test of the readiness of sellers of the US currency to continue the beating of their opponents that began in November.

The impact of the energy crisis should not be underestimated either. According to ING, the rise in oil prices due to the EU embargo and the G7's bandwagon against Russian black gold, as well as cold weather in Europe, will lead to a tighter gas market, which will have a negative impact on EURUSD. The company predicts that the euro will fall below $1,045, with a further decline by the end of the year.

So far, this scenario has not materialized. Despite serious restrictions on the movement of Russian oil, there is no growth in Brent quotes, and increased reserves of blue fuel in Europe smooth out the negative from expectations of a cold snap and an increase in demand. Storage occupancy is currently around 91%.

Dynamics of gas reserves in Europe

This image is no longer relevant

Lane's speech did not bring preferences to either "bulls" or "bears" in EURUSD. On the one hand, the chief economist doubted that the peak of inflation was passed, which indicates a continuation of the tightening cycle of monetary policy, at least in 2023. On the other hand, he said that when making decisions, the ECB should take into account the cumulative effect of previous increases in the cost of borrowing . The rate has already increased by 200 bps. Such rhetoric signals the intention of the European Central Bank to raise it not by 75 but by 50 bps.

This image is no longer relevant

In my opinion, ahead of the release of inflation data in the US on December 13 and the announcement of the results of the FOMC meeting on December 14, EURUSD will storm, but up and down movements will be local in nature, eventually forming a consolidation.

Technically, the upper limit of the estimated EURUSD trading range is in the area of 1.0565–1.061, the lower one is in the area of 1.0385–1.0445. The growth of quotes of the main currency pair, followed by a rebound from resistance, should be used for sales. On the contrary, unsuccessful assaults on supports are for the formation of longs.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2023
Euro vs US Dollar
Select timeframe
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 always strives to help you
    fulfill your biggest dreams.
  • 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.
  • 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.
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
  • 30% Bonus
    Receive a 30% bonus every time you top up your account

Recommended Stories

The U.S. dollar is losing its appeal as a safe haven: what does this mean for the EUR/USD pair?

A strong U.S. dollar was one of the main headwinds for gold and all precious metals last year as investors embraced the currency as a safe haven. But this forecast

Irina Yanina 16:42 2023-02-03 UTC+2

Weak US jobs data will support equities and put pressure on dollar

Markets continued to take advantage of the positive sentiment that emerged after the FOMC meeting on Wednesday. This is not surprising since the start of the new year, they have

Pati Gani 13:22 2023-02-03 UTC+2

GBP/USD. Overview for February 3. 2023

The GBP/USD currency pair increased as well, though far less significant than the EUR/USD pair. Additionally, this situation ought to have caused traders to pause. Why is the euro strengthening

Paolo Greco 11:20 2023-02-03 UTC+2

EUR/USD. Overview for February 3, 2023

The EUR/USD currency pair was moving in multiple directions on Thursday, but the previous evening it left the side channel it had been in for the previous three weeks

Paolo Greco 10:47 2023-02-03 UTC+2

Bitcoin rallies on Powell's remarks

Bitcoin's 40% rally in January, the best in a month since 2020, massive capital inflows into cryptocurrency-focused ETFs, and a $250 billion increase in market capitalization over the past four

Marek Petkovich 10:17 2023-02-03 UTC+2

EUR/USD: demand falls despite latest ECB rate hike

The ECB announced a 0.5% increase in its interest rate and explicitly said that there could be a similar one in March, depending on the economic data that will come

Jozef Kovach 08:21 2023-02-03 UTC+2

EUR/USD. The Fed hit the dollar, the ECB hit the euro

The European Central Bank increased the interest rate by 50 points at this year's first meeting, while announcing a 50-point hike at the next meeting in March. Despite such hawkish

Irina Manzenko 05:13 2023-02-03 UTC+2

GBP/USD. The Bank of England disappointed the British currency

The Bank of England, following the results of the first meeting in 2023, raised interest rates by 50 basis points to a target of 4.0%. At the same time

Irina Manzenko 23:00 2023-02-02 UTC+2

The implications of the Fed press conference for the markets

Federal Reserve Chairman Jerome Powell said policymakers expect a couple more interest rate hikes before suspending their aggressive tightening campaign, even as they slowed their efforts to rein in inflation

Andrey Shevchenko 22:59 2023-02-02 UTC+2

The euro is capable of more

Anything that rises can stay high. After Federal Reserve Chairman Jerome Powell failed to play the role of super-cool hawk and released the market's animal spirits, EURUSD soared above 1.1

Marek Petkovich 22:59 2023-02-02 UTC+2
Can't speak right now?
Ask your question in the chat.