EUR/USD Forecast: Is A Bear Market On The Horizon After Powell’s Words?
The EUR/USD exchange rate dropped to 1.0668, a level not seen since early January, although it quickly recovered before the US market closed.
The EUR/USD exchange rate dropped to 1.0668, a level not seen since early January, although it quickly recovered before the US market closed. Although European authorities kept up their hawkish rhetoric, the Euro remained one of the Dollar’s weakest competitors. Joachim Nagel, a member of the European Central Bank’s (ECB) governing council, has claimed that the ECB has no plans to lower interest rates in the near future and that current ECB rates are not yet restrictive. There also has to be “more dramatic” price increases, he said. Also, ECB Executive Board Member Isabel Schnabel has stated her intention to raise rates by 50 basis points in March.
While the track of EUR/USD over the previous four months hasn’t been a straight line higher, buyers have been in the driver’s seat since the announcement of the October nonfarm payrolls on November 4. (NFPs). The benchmark exchange rate had the largest 12-week or three-month charge of 1,275 pips, or almost 13%, in nearly 12 years.
An overextended market would need strong fundamental reason to maintain such a trend, and that would become increasingly difficult to come through. But the events of the past week have had the opposite effect. Updating growth projections and catching up to its competitors with hawkish rhetoric, the European Central Bank appears to have contributed to the Euro’s climb to the 1.10 level.
The Euro and European 2-year rates did not react favorably to last week’s rate hike by the European authority and vow to hike at least another 50bp clip at the next meeting. In the meantime, the US labor statistics and service sector activity from last Friday provided the Greenback with a much-needed respite rally.
Rather than being based on a more optimistic economic outlook, as is usually the case, the fee was the result of an improved interest rate projection.
However, the pressure was sufficient to cause EURUSD to break out of the risk wedge it had been stuck in for the past three months and slide further technical levels in the longer-term 61.8 Fib retracement and former ‘pivot’ at 1.0770.As of Tuesday night’s close, however, the 50-day simple moving average (SMA) has remarkably not been breached. Following a day of volatility spurred by comments from Federal Reserve Chairman Jerome Powell, technicians are seeing big intraday swings, or “wicks,” that indicate a lack of direction.
EUR/USD Technical Outlook
Yesterday, the EUR/USD pair engaged in a few negative trades in order to test the exponential moving average (EMA50), but today, stochastic is clearly gathering positive momentum, ready to inspire the price to resume the major bullish trend, which has 1.1030 as its next station. For the foreseeable future, we will maintain our positive perspective; however, a breakdown below 1.0845 could prompt the price to test the 1.0745 zones before making a new attempt to rise. Today’s trade might go anywhere from a low of 1.0800 to a high of 1.0970.
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