Forex Analysis & Reviews: Dollar puts opponents to flight
time 28.09.2022 04:55 PM
time Relevance up to, 03.10.2022 02:43 PM

The rise in gas prices and the panic in the financial markets of Britain do not allow the EURUSD bulls to raise their heads. Euro fans fear that Nord Stream-related sabotage will spill over to other pipelines. The IMF sees UK tax cuts as excessive and in need of reconsideration, Moody's warns of irreparable damage to public debt availability, and there are growing talks in Forex that the Bank of England will need to raise the repo rate by 100 bps to remedy the situation at the November meeting. The euro area is full of turmoil, and, in such conditions, safe-haven currencies tend to thrive.

Panic and fears in the markets have become an invariable attribute in 2022. It would seem that what could be worse than a pandemic? The armed conflict in Ukraine answered this question. Humanity is on the brink of nuclear war, no wonder investors are buying up the US dollar like hotcakes.

Since the beginning of 2020, the global economy has experienced four shocks: COVID-19, a colossal fiscal and monetary expansion, pent-up demand after coming out of lockdowns amid a lack of supply, and finally, the war in Eastern Europe. The latter hit the energy of the euro area very hard, put the Eurozone economy on the brink of recession and forced the EURUSD to collapse to 20-year lows.

Dynamics of gas prices in Europe

This image is no longer relevant

In such circumstances, even aggressive tightening of monetary policy does not help the euro. According to European Central Bank President Christine Lagarde, the cost of borrowing will be increased at the next few meetings of the Governing Council in order to anchor inflation expectations and bring inflation back to the 2% target. The ECB does not set itself the goal of provoking a recession. Its main goal is price stability. Alas, supply problems cannot be solved by limiting demand.

The ECB is unable to influence gas prices, and the higher it raises the deposit rate, the deeper the recession in the eurozone economy will be. This will eventually force the central bank to stop. At best, borrowing costs will rise to 2.75%.

By then, the federal funds rate could reach 4.5%. St. Louis Fed President James Bullard urges to get there as quickly as possible. Cleveland Fed President Loretta Mester argues that real rates must be positive to beat inflation.

This image is no longer relevant

Thus, divergences in monetary policy and economic growth continue to play on the side of the EURUSD bears, suggesting the stability of the downward trend. Investors are fleeing Europe without looking back: in 8 months, the outflow of capital from the eurozone-focused ETFs reached $98 billion. This is more than during the pandemic in 2020 and is comparable to the eurozone debt crisis in 2011–2012.

Technically, there is an inside bar pattern on the EURUSD daily chart. While the quotes have not returned to its top at 0.967, the euro should be sold against the US dollar in the direction of 0.94.

Marek Petkovich,
Chuyên gia phân tích của 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.
  • Tiền gửi lần truy cập
    Ký quỹ tài khoản của bạn với $3000 và nhận được $10000 nhiều hơn!
    Trong Tháng 01 chúng tôi xổ $10000 trong chiến dịch Chancy Deposit!
    Có được một cơ hội giành chiến thắng bằng việc ký quỹ $3000 vào một tài khoản giao dịch. Đáp ứng được điều kiện này, bạn trở thành một người tham gia chiến dịch.
  • Giao dịch khôn ngoan, thành công
    Nạp tiền vào tài khoản của bạn với ít nhất $ 500, đăng ký cuộc thi và có cơ hội giành được các thiết bị di động.
  • 100% tiền thưởng
    Cơ hội duy nhất của bạn để nhận 100% tiền thưởng khi gửi tiền
  • 55% Tiền thưởng
    Đăng ký tiền thưởng 55% cho mỗi lần gửi tiền của bạn
  • 30% tiền thưởng
    Nhận 30% tiền thưởng mỗi khi bạn nạp tiền vào tài khoản của mình

Recommended Stories

ECB rates to peak longer than Fed rates, pushing EURUSD above 1.2

Forex is a place where questions never end. In the first phase of monetary tightening, investors worry about how quickly rates will rise. Then, how high they will grow. Finally

Marek Petkovich 15:10 2023-01-27 UTC+2

Does the US debt ceiling issue pose a threat to the world economy?

Additionally, US President Joe Biden blasted the Republicans, alleging that they want to use the debt ceiling as leverage in economic negotiations, as the markets were getting ready

Jakub Novak 12:11 2023-01-27 UTC+2

The euro has a good chance

According to a survey of analysts, the European Central Bank's decision to raise interest rates by 50 basis points is already final, so the euro has a high probability

Jakub Novak 12:01 2023-01-27 UTC+2

GBP/USD. Overview for January 27, 2023

On Thursday, the GBP/USD currency pair maintained its upward trend. If we consider the daytime, which is the period of greatest activity, the US dollar increased for little more than

Paolo Greco 11:47 2023-01-27 UTC+2

EUR/USD. Overview for January 27, 2023

The EUR/USD currency pair is gradually increasing. This is because nothing has changed over the last day, as we have stated. The present upward trend will not be interrupted even

Paolo Greco 11:35 2023-01-27 UTC+2

Economic growth in the US was strong at the end of 2022

The key takeaway from yesterday's Q4 GDP report was that economic growth in the US was strong at the end of 2022, thanks to the strong labor market and lower

Irina Yanina 11:25 2023-01-27 UTC+2

Soft landing of the US economy could boost markets, but pressure dollar

Mixed economic data from the US had caused a downturn in stock markets, but the situation leveled off later, allowing indices to crawl back up again. The reports indicated that

Pati Gani 10:08 2023-01-27 UTC+2

EUR/USD. U.S. GDP growth was better than expected, but the dollar reacted weakly to the report

The euro-dollar pair reacted erratically to the latest US GDP report. Initially, the price fell to the lower limit of the 1.0850-1.0950 range, then returned to the area

Irina Manzenko 22:52 2023-01-26 UTC+2

EURUSD: Can ECB push EUR higher?

If the market does not go in the direction it is expected to be seen, it is more likely to go in the opposite direction. Will this principle of technical

Marek Petkovich 17:39 2023-01-26 UTC+2

Fresh data on US inflation could determine the path of the Fed

Before the Fed holds its first committee meeting for this year, a report on core PCE will be released, which will definitely have an impact on the decisions the central

Irina Yanina 15:08 2023-01-26 UTC+2
Không thể nói chuyện ngay bây giờ?
Đặt câu hỏi của bạn trong phần trò chuyện.