Even if we do rally from here, then it’s likely that we will see an opportunity to short this market again, especially as the US dollar has been like a wrecking ball against almost everything. 

The EUR/USD has gone back and forth during trading on Monday, as we continue to see the parity level attract a lot of attention. It’s worth noting that the market is simply chopping around, and it’s not doing anything right now. That does make a certain amount of sense that we are going to continue to see a lot of confusion around this area, just simply because there’s a lot of psychology attached to the idea of parity.

The US dollar will continue to be stronger than the Euro in general since the European Union has a whole host of issues that the United States does not have to deal with. The first one of course is going to be energy and the fact that it may be running out of energy. At this point, there are a lot of concerns about the EU energy supply this winter, and there does not seem to be anything out there changing the outlook for Europe. Because of this, the economic outlook for Europe must be thought of as poor at best.

Dollar Backed by Federal Reserve

• The US dollar is backed by a very hawkish central bank, one that is willing to fight inflation. In other words, interest rates are going up in America and that typically does help the currency.
• Beyond that, we also must look at this through the prism of simple momentum.
• The Euro has been falling for ages, and it does take quite some time to turn the entire trend around.

Even if we do rally from here, then it’s likely that we will see an opportunity to short this market again, especially as the US dollar has been like a wrecking ball against almost everything. The 50 Day EMA sits just above the 1.02 level, and I think then continues to be an area that people will pay close attention to. After that, the market then starts to focus on the will .04 level, an area that has been important a couple of times in the past, as it had previously been supported. “Market memory” could come into the picture and offer a certain amount of resistance selling. Either way, I don’t have an interest in buying the Euro anytime soon, and therefore I’m just looking to pick up the US dollar “on the cheap.”

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It’s likely that we continue to see more downward pressure than up, so I have absolutely no interest in buying this pair anytime soon.

The EUR/USD has broken through parity again during the trading session on Monday and has now left the parity level behind. In fact, it looks like the Euro is going to try to go down to the $0.99 level, and beyond. I have been saying for a while that if we give up parity, it’s very likely that the first target will be the $0.98 level, and there’s nothing on this chart that remotely suggests that we are not going to at least try to get down there.

• Rallies at this point will be probably best thought of as the market offering “cheap US dollars”.
• We will be looking for signs of exhaustion after short-term rallies that I can start shorting again. 
• This pair is extraordinarily choppy, but it does tend to move very slowly overall.

In that scenario, you may need a day or 2 of bullish pressure to bring back the sellers. However, we could also break down below the bottom of the candlestick for the session on Monday, opening up a flood of fresh selling. At that point, the Euro is going to go looking into the $0.99 level.

Rallies at this point will be looked at with suspicion, even if we can break above the parity level. At that point, the $1.01 level, the $1.02 level, and the 50 Day EMA all offer potential resistance barriers as well. Because of this, the market will almost certainly have to pay close attention to signs of the markets selling off and look at them as an opportunity to pick up “cheap US dollars.” That of course is what you’re hoping for, the opportunity to short at higher levels in what is a strong and reliable downtrend.

The Europeans have a mess on their hands, as energy is not necessarily guaranteed to the continent this winter, and that has put on quite a bit of pressure when it comes to the manufacturing sector, as natural gas may have to be rationed. In that scenario, it’s obvious that the economy would slow down quite drastically, forcing the ECB to be extraordinarily loose with its monetary policy. As things stand right now, it’s likely that we continue to see more downward pressure than up, so I have absolutely no interest in buying this pair anytime soon.

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EUR/USD plummets to new 19-year low.

My previous EUR/USD signal last Wednesday produced a losing short trade from $1.0195, although the same level was later rejected to provide the high of the day, so I was correct about that resistance level.

Today’s EUR/USD Signals

Risk 0.75%.

Trades may only be entered between 8am and 5pm London time today.

Short Trade Idea

• Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $0.9950 or $1.0000.
• Place the stop loss 1 pip above the local swing high.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 50 pips in profit and leave the remainder of the position to run.

Long Trade Ideas

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $0.9900, $0.9850, or $0.9800.
• Place the stop loss 1 pip below the local swing low.
• Move the stop loss to break even once the trade is 20 pips in profit.
• Take off 50% of the position as profit when the price reaches 20 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

EUR/USD Analysis

In my last analysis of the EUR/USD currency pair on 17th August, I saw the technical picture as more bearish following the breakdown below the ascending trend line, which was confluent with a clear level of resistance at $1.0195, which was also quite confluent with the round number at $1.0200. I saw a short from there as the best potential trade of the day and I was not wrong, although the initial rejection during the New York session saw the high exceeded again later.

The technical picture now is even more bearish, as the price plummets through blue sky to new 19-year lows which have not been seen since 2022, well below parity.

There are no obvious support levels, except perhaps round and half numbers.

There is strong bearish momentum, and longer-term traders could have a good opportunity to go short if we see a bullish retracement to $0.9950 or even the parity level at $1.0000.

Shorter-term traders can try to ride the momentum by selling rallies on short-term time frames, perhaps being cautious of trading right into any major round numbers.

Trend traders will not want to miss the bearish momentum here.There is a very strong bullish market and long-term trend in the US Dollar, with the Euro one of the weakest major currencies (the British Pound is the other), so we can expect plenty of action here today as this pair is in the market’s focus.

Concerning the USD, there will be a release of Flash Services PMI data at 2:45pm London time. Regarding the EUR, there will be releases of French, German, and British PMI data between 8:15am and 9:30am.

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The EUR/USD exchange rate entered the new week’s trading once again, determined to break the parity rate. The currency pair actually crashed towards the 0.9926 support level, the lowest for the currency pair in two decades. It settled around the 0.9950 level ahead of the announcement of the PMI readings for the manufacturing and services sectors for the economies of the euro zone amid expectations of a further slowdown in the bloc’s economy due to the continuation of the Russian-Ukrainian war and its repercussions.

The euro briefly benefited after ECB Executive Board member Isabelle Schnabel suggested last week that a second 0.50% increase in ECB interest rates for September should not be ruled out, but her relief from selling pressure was temporary. The euro was quick to collapse back toward parity during the latter half of last week after remarks on Wednesday from a string of Fed officials reopened the market debate over whether the Fed might opt ​​for a third 0.75% increase in US interest rates. The next meeting is in September.

Commenting on the performance, Jordan Rochester, FX analyst at Nomura said, “The euro has been very range bound, but we don’t think that will last. There has been a huge imbalance of euro shorts since parity was reached, governments began to share high energy costs with consumers, companies will have to start cutting production slowly, while supply lines are being damaged by a lack of transportation options and low water levels on the Rhine.”

“The market could also start the price to fall softer in the US, with an eye on PMIs this week if we bounce back, as seen in the Philadelphia Fed survey, it could keep the euro under pressure as well,” the analyst added. The Analyst’s view is a reconfirmation of expectations that EUR/USD will fall back to 0.9750 by the end of September.

EUR/USD Economic Data

The euro recovered from the strength it lost earlier in July after some US economic figures indicated that the economy may be close to recession, while other data indicated that inflation pressures may have moderated in recent months, leading to speculation about a possible slowdown in the economy. This is the rate at which stagnation occurs. The Fed is likely to raise interest rates next year.

US employment figures and other data mocked concerns about the health of the economy earlier this month, while some members of the Federal Reserve’s rate-setting committee continued to pay short attention last week to the concept of a slowdown in the pace of policy normalization. In the future, resulting in a simultaneous recovery in US bond yields and the dollar.

• EURUSD will be sensitive this week to the message and implications of the latest S&P Global Manufacturing and Services PMI surveys on Tuesday, especially if they show any signs of bottoming out expectations for European economies.
• Thursday’s July ECB meeting minutes are also likely to be poured, although much about the euro’s future will depend on the dollar’s response to economic figures due out of the US ahead of Federal Reserve officials’ comments on Friday.

EUR/USD forecast today:

The general trend of the EUR/USD currency pair is still bearish. Stability below the parity price confirms it is stronger. Continuing control of the bears on the trend and is warning of a stronger downward move if the weakness factors of the currency pair persist. The euro may remain under pressure from fears of a complete cut off Russian gas from Europe. Therefore, any attempts for the EUR/USD pair to rebound higher will be subject to selling.

The closest support levels for the euro dollar today are 0.9920, 0.9835 and 0.9770, respectively. On the other hand, on the daily chart, breaking the resistance 1.0200 will be important for an initial break of the current downtrend. The Euro will be affected by the announcement of the PMI readings for the manufacturing and services sectors for the Eurozone economies. From the United States, the PMI reading for the manufacturing and services sectors and US new home sales will be announced.

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We don’t have any interest in trying to get bullish in the short term,

The EUR/USD has fallen during the trading session on Friday, as it looks like we are hell-bent on testing the parity level again. The parity level has a lot of psychology attached to it, and if we were to break down below the parity level on a daily close, it could kick off even more algorithmic trading to the downside. The market has been in a negative move for quite some time.

The 50 Day EMA above sits near the 1.03 level and is driving lower. That should continue to offer plenty of dynamic resistance, and at this point in time, it’s likely that the market trying to restore that area will almost certainly find sellers. I don’t have any interest in trying to get bullish in the short term, I think it’s probably more likely than not going to be a scenario where interest rates in the United States will continue to rise, and therefore it’s likely that the Euro will be a punching bag as a result.

Europe and United States

Furthermore, the European Union has a lot of problems coming down the road this winter, as energy will be a major issue and of course, almost all economic indicators coming out of the European Union are very negative. This is in stark contrast to the United States which has a hot economy and alot of inflation as well. This is not to say that there will be all roses and puppy dogs in the United States, but at this point, it’s likely that the United States will fare much better than Europe. With this, I think we continue to see the greenback attract a lot of attention as well, if for no other reason than people will be more apt to put money in New York than Frankfurt.

• It’s difficult to imagine a scenario where we get overly bullish.
• I think we continue to see signs of exhaustion get sold into, and that’s probably the best trade.
• If we break below the recent lows which are just below the parity level, I will not hesitate to start shorting the Euro in that scenario as well.
• It’s not until we break the 1.06 level at the very least that I would consider buying the Euro.

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The bears will target long-term profits at around 0.9920 or lower at 0.9770.

Investors’ desire to buy the US dollar and abandon the euro due to concern about a bleak future for the recovery of the euro bloc contributed to the increase in the selling operations of the EUR/USD currency pair. This is with losses that reached the 1.0032 support level, the lowest in five weeks, and closed last week’s trading stable around those losses. The euro is on track to fall 1.7% since last Friday, which would be its worst trading week since July 8. The British pound is on its way to recording its worst week in more than a year and is headed for a 2% drop. This performance of the most famous currency pair in the forex market is on an important date this week with the announcement of the growth rate of the US economy, along with the Jackson Hole Symposium event, which will have a strong reaction to the expectations of raising US interest rates in the remainder of 2022.

In this regard, the President of the Federal Reserve Bank of Lewis, James Bullard, said that he is leaning towards supporting the US interest rate hike for the third time in a row by 75 basis points in September, while Mary Daly, a colleague at the Federal Reserve Bank in San Francisco, said that raising interest rates by 50 Or 75 basis points next month would be “reasonable.” Kansas City Fed President Esther George said she and her colleagues won’t stop tightening policy until they are “fully convinced” that hyperinflation is going down.

Economic Analysis

The EUR/USD currency pair is trading affected by the announcement that the European Union Harmonized Index of Consumer Prices (HICP) for the month of July matches the expected (monthly) change of 0.1% with a reading of 0.1%, while the equivalent (based on annual) in line with 8.9%. The previous HICP index for food, energy and air transport also matched expectations on a monthly (monthly) and (annual) basis. Prior to that, it was announced that the European primary GDP for the second quarter fell from the expected change in the ninth quarter of the year by 0.7% with a change of 0.6%, while the equivalent (on an annual basis) also came less than 4% with a change of 0.6%. 3.9%.

In the United States, initial US jobless claims for the week ending August 12 exceeded the expected claim count of 265K with a lower count of 250K. On the other hand, the continuing claims of the previous week beat the expected figure of 1.438 million with 1.437 million. Prior to that, US retail sales numbers for July beat the expected 0.6% change with a 0.8% change, while general retail sales fell 0.1%, down 0% month-on-month.

Technical analysis of the EUR/USD pair:

In the near term and according to the hourly chart, it appears that the EUR/USD pair has recently completed a bearish breakout from forming an ascending channel. This indicates a significant shift in market sentiment in favor of the bears. Therefore, they will look to extend the current declines towards the 1.0000 support or lower to 0.9945 and on the other hand, the bulls will look to take profits around 1.0112 or higher at 1.0143.

In the longer term and according to the performance on the daily chart, it appears that the EUR/USD currency pair has recently completed a downside breakout forming an ascending channel. This indicates that the bears are trying to control the pair. Therefore, the bears will target long-term profits at around 0.9920 or lower at 0.9770. On the other hand, the bulls will look to see a bounce around 1.0196 or higher at 1.0371.

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The next key catalyst for the EUR/USD price will be the latest European consumer inflation data

Bearish view

• Set a sell-stop at 1.0150 and a take-profit at 1.00.
• Add a stop-loss at 1.0250.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.0235 and a take-profit at 1.0300.
• Add a stop-loss at 1.0150.

The EUR/USD price rose slightly after the Federal Reserve published minutes of the last monetary policy meeting. The pair rose to 1.0200, which was a few points above this week’s low of 1.0120. It remains substantially lower than last week’s high of 1.036.

Fed minutes and EU inflation data

The EUR/USD price tilted upwards after the FOMC published minutes of the past meeting. The minutes showed that some officials judged that it will be necessary to decelerate the pace of interest rate hikes in a bid to evaluate the impact of the past meetings.

Members were worried that the bank could be tightening at a substantially faster pace than is necessary. In that meeting, the committee decided to hike interest rates by 0.75% for the second straight month. It brought the total rate hikes this year to 225 basis points. The minus added:

“As the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.”

A lot has happened since the Fed met in July. Data by the Bureau of Labor Statistics (BLS) showed that the country’s unemployment rate dropped to 3.5%. Further, inflation moderated slightly in July as it dropped from 9.1% to 8.7%.

On Wednesday, data showed that retail sales did well in July. Headline sales rose at an annual pace of 10.1%. Additionally, big retailers like Walmart and Home Depot published results that were better than expected.

The next key catalyst for the EUR/USD price will be the latest European consumer inflation data. Based on the previous estimates, analysts believe that the headline consumer inflation rose to 8.9% while core inflation rose by 4%.

The pair will also react to the latest existing home sales numbers. Economists expect the data to show that sales dropped from 5.12 million to 4.89 million in July. Fed officials like Esther George and Neel Kashkari will also deliver speeches.

EUR/USD forecast

The four-hour chart shows that the EUR/USD price has been in a strong downward trend this week. It managed to move below last week’s high of 1.0366 to a low of 1.0123. The pair has dropped below the 25-day and 50-day moving averages and the ascending purple trendline. It is also between the 23.6% and 38.2% Fibonacci Retracement level. The pair will likely continue falling and retest the crucial parity level at 1.000.

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Quiet trading sessions with a bearish bias is what is described as the performance of the EUR/USD currency pair recently. The EUR/USD is stable around the 1.0210 level at the time of writing the analysis. As I mentioned at the beginning of this week’s trading, the euro-dollar may move in narrow ranges until the US inflation figures are announced, the main driver of the markets this week. The US dollar this week got a strong impetus from the US jobs numbers, which support the tightening path of the US Federal Reserve’s policy.

What is expected for the EUR/USD in the coming days?

The EUR/USD exchange rate is expected to fall back below 1.0 in the coming weeks, according to analysts at Rabobank, the international lender and Dutch investment bank. The new analyses indicate that the US dollar will likely remain well supported until 2023, a view that contrasts with that of some analysts who say we are at a turning point with the end of the dollar’s multi-month rally.

This view is supported by the recent consolidation in the EUR/USD which fell below parity in mid-July but has since recovered and consolidated between 1.01 and 1.03. “The market will now be looking for a new direction,” says Jane Foley, chief forex analyst at Rabobank in London. “For this to happen, the strength of the US dollar will likely be complemented by another bout of fresh negative news for the euro.”

Euro Catalysts

Rabobank sees the following factors as likely to trigger another sustainable sell-off in the Euro:

• A harsh winter for Europe.
• They see the prospects for a recession in the Eurozone strong.
• Since rising energy prices are a major headwind for businesses and consumers.
• Cold winter with possible full gas shutdown across Nord Stream 1 .

“We continue to see further potential declines in the euro from 1 to 3 months,” the bank’s analyst added. “Coincidentally, we expect the US dollar to remain well supported in this period.”

US dollar motivators.

Rabobank sees the following factors helping the US dollar:

• It seems that the Federal Reserve is ready to announce a 75 basis point rate hike on September 21st.
• This is a result of the strong US labor market report last week for the month of July.
• The US dollar is also likely to find support from safe haven demand.

Accordingly, the analyst added, “The US dollar is the most billed currency in the world by a wide margin. This means that a strong green currency tends to have a negative effect on trade.”

Another risk to global economic growth is slowing demand for goods from China. Accordingly, the analyst says, “In our view, the value of the US dollar is likely to remain stable until the risky currency environment improves. This suggests that there is room for the US dollar until 2023.” He added, “Although we expect the EUR/USD 1.01 area to act as a strong support going forward, we maintain the view that the EUR/USD is likely to fall back below parity again in a spectacle of 1 to 3 months.

EUR/USD analysis:

There is no change in my technical view of the performance of the EUR/USD pair until the announcement and the reaction from the US inflation figures today – the consumer price index – which will have an impact on the expectations of raising US interest rates. According to the performance on the daily chart, the decline of the Euro-dollar below the support level 1.0140 will support the bears to move further downward and does not rule out the parity price with it. On the upside, without a test of the 1.0330 and 1.0400 resistance levels, the bulls won’t have a strong chance to take control. I still prefer to sell EURUSD from every bullish level.

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During the middle of this week’s trading, the price of the EUR/USD currency pair is subjected to selling operations. As mentioned before that this may be very likely as the markets prepare for the reaction from the announcement of the US jobs numbers. This is in addition to the continuing strong threat to the energy future in Europe, increasing global geopolitical tensions, and the dollar as a safe haven. The selling of the Euro-dollar reached the support level of 1.0122 before settling around the 1.0170 level in the beginning of trading today, Thursday.

What is adding to the euro’s losses in the forex currency market?

Recent indications from the results of economic data from the eurozone, which confirm that the bloc is suffering from recession due to the interruption of crucial Russian energy sources, which may stop the path of raising interest rates by the European Central Bank. On the other hand, the Federal Reserve is indifferent to fears of economic stagnation and is determined to raise US interest rates until containing US inflation, which recorded its highest in 40 years.

It appears that ECB officials have invested billions of Euros in bond purchases to protect Italy and other southern Euro members since activating their first line of defense a month ago to keep speculators at bay. Data released this week indicates a significant use of debt-free funds maturing in its pandemic program portfolio, indicating the use of a tool crafted by policy makers as an initial response to any market turmoil.

The statistics, available on a two-month-only basis, show net holdings of German, French and Dutch bonds fell by 18.9 billion euros ($19.3 billion) through July. Net purchases of debt from Italy, Spain, Portugal, and Greece amounted to 17.3 billion euros. The figures are the first hard data to reveal the European Central Bank’s intervention in the debt markets after the explosion in bond yields in June forced President Christine Lagarde to hold an emergency meeting where officials agreed on the need to respond.

As an initial step, policymakers agreed to be flexible in reinvesting upcoming paybacks into the €1.66 trillion pandemic-era asset purchase program. To regulate bond purchases, they divided the eurozone into three categories: donors including Germany, France and the Netherlands, recipients from Italy, Greece, Spain and Portugal, and so-called neutrals.

Lagarde described this resilience as the ECB’s first line of defense against market volatility that threatens the transmission of monetary policy, with the newly created debt-buying tool in the background in case bolder interventions become necessary. Italy has been the focus of investor interest since before the collapse of Italian Prime Minister Mario Draghi’s government last month and elections were put on the agenda in late September.

Technical analysis of the EURUSD:

EUR/USD is moving within a range, with support around 1.0120 and resistance at 1.0270. The price attempted to break above the top but has since fallen back inside the pattern. The pair is approaching the bottom of the range, which may once again settle as a floor. In the near term the 100 SMA is above the 200 SMA to indicate that there is a chance to go up but lacks strong momentum.

Stochastic is also moving higher to show that buyers are in control. The oscillator has room to rise before reaching an overbought area to reflect fatigue among buyers, so another bounce to resistance may follow. EUR/USD fell below the dynamic inflection points at the moving averages as an early sign of selling pressure. A break below the support level could lead to a decline that is the same height as the consolidation pattern or 150 pips.

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Bearish view

• Set a sell-stop at 1.0100 and a take-profit at 1.000.
• Add a stop-loss at 1.0200.
• Timeline: 1 day.

Bullish view

• Set a buy-stop at 1.0225 and a take-profit at 1.0280.
• Add a stop-loss at 1.0050.

The EUR/USD price rose sharply after the hawkish interest rate decision by the Federal Reserve. The pair rose to a high of 1.0210, which was the highest point since Tuesday. The price is about 1.40% below the highest level last week.

Federal Reserve rate decision

The Federal Open Market Committee (FOMC) concluded its meeting on Wednesday and decided to hike interest rates by 75 basis points for the second straight meeting. This is the most aggressive that the bank has been at in decades.

The Fed has now hiked interest rates by 225 basis points as it struggles to lower inflation that has risen to the highest point in over 40 years. It is also struggling to lower this inflation without causing a recession.

Still, recent data show that the economy is deteriorating at a fast pace. For example, data published this week showed that pending home sales dropped by 8.6% in June after rising by 0.4% in the previous month. The decline was worse than the median estimate of -1.5%.

On Tuesday, data showed that new home sales declined by 8.1% after rising by 6.3% in May. These new home sales dropped from 642k to 590k. The House Price Index (HPI) declined from 1.5% to 1.4%, meaning that the sector is facing challenges.

The next key data to watch will be the first estimate of GDP data. Economists expect the data to show that the economy expanded modestly by 1.5% in Q2 after falling by 1.6% in Q1. Therefore, the Fed is battling a situation known as stagflation, where slow growth coincides with a rising inflation.

The EUR/USD pair will react to the latest German consumer price index (CPI). Economists expect that the headline inflation rose from 0.1% to 0.6% on a MoM basis. The European Commission will also publish the latest business and consumer confidence data.

EUR/USD forecast

The EUR/USD pair moved sideways after the latest Fed decision. On the 4H chart, the pair has moved slightly below the 25-day moving average while the Relative Strength Index (RSI) has formed a bearish divergence pattern. It is at the important support at 1.0132, which was the lowest level on July 22nd. The pair will likely continue falling as sellers target the parity level at 1.000.

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