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28.09.2022: EUR and GBP have no reason to recover. Outlook for EUR/USD and GBP/USD

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Since last Friday, the situation in various markets has depended on the pound sterling, which unexpectedly slumped to all-time lows. This was the main driver of the US dollar rise, which led to a decline in stock indices and commodities.
After an insignificant rebound in the pound sterling, the greenback continued gaining in value. This time, the appreciation was caused by an announcement provided by the Bank of England. The regulator said that it was not planning to take emergency measures. It means that the BoE will not raise the benchmark rate until the next meeting. In this light, the pound sterling started falling, thus dragging the euro.

Since macroeconomic data remains extremely negative, the market situation will hardly change and the US dollar is likely to go on gaining in value. Data on Germany’s consumer climate indicator provided by Gfk showed a slump to -42.5 points. The indicator touched the all-time low for the fourth month in a row. Consumers are deeply concerned about high energy prices and a possible recession. The current inflation rate, which has almost reached 8%, has been significantly reducing consumers’ income. This, in turn, has a negative effect on purchasing power.
What is more, the EU's political stability is also under threat. Firstly, the results of Italy’s general election, in which the far-right party won the majority, surprised everyone. Secondly, Catalonia announced its intention to hold an additional referendum on the region’s independence from Spain.

Against the backdrop, investors resumed selling off the euro. After a minor rebound, the euro started falling against the greenback. As a result, the currency hit a new swing low of the downward cycle located at 0.9553. This points to the prolongation of the downtrend.
If the price settles below 0.9550, it will fall even deeper. In this case, traders may pay zero attention to the signal of overheated short positions. The pair may slide to the lows recorded in 2001 and 2000.
According to the alternative scenario, the euro/dollar pair may rebound from 0.9550 as it was at the beginning of the week.

Meanwhile, the pound sterling continues hovering near its all-time lows. The fact is that the technical signal about a rebound is overshadowed by speculators’ great interest in short positions.
If the pound/dollar pair settles below 1.0600 on the four-hour chart, it may fall to the recent local low. Notably, traders may unexpectedly start to lock in profits amid considerably overheated short positions. This, in turn, may spur a technical rebound.
Until the price settles below the control area, the formation of the range of 1.0630/1.0930 remains highly possible.


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00:00 INTRO
00:50 GFK GERMAN CONSUMER CLIMATE
01:59 EUR/USD
02:50 GBP/USD
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