2023-07-24 00:34:58
EUR/USD: Last week’s sell-off related to forex conditions
The EUR/USD pair entered the weekend near its lows, as the pair showed a healthy dose of correlation with broad market conditions.
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EUR/USD’s ability to reach as high as 1.12760 last Tuesday touched a value not seen since late February 2022. However, following hitting a long-term high early last week, EUR/USD also reversed general forex conditions. It started to produce a fairly quick sell-off which escalated as the weekend approached. The EUR/USD pair will start trading tomorrow near the level of 1.11245.
While day traders who are still bullish in the EUR/USD may be disappointed as support levels late last week were weak, the bears in this pair are also a reminder that forex is never a one-way street. Hopefully, traders will not experience painful losses, as the EUR/USD has reversed, and understand that this pair is likely to be seen as overbought in the short term like many of the other major currencies that are traded once morest the US dollar.
The quick selling of the EUR/USD pair reflected the broader forex market, but the pair remains fairly intact and within the higher elements of its price ranges in the medium and long term. Economic conditions are complex in the European Union The situation of inflation and recessionary pressures is evident through the data. The European Central Bank will release its interest rate decision next Thursday, following the US Federal Reserve’s policy statement on Wednesday. The European Central Bank and Federal Reserve are both expected to raise lending rates by 0.25% this week.
Day traders need to understand that potential upcoming interest rate hikes have been internalized in the market for EUR/USD. What financial institutions and speculators now want to know is the outlook for the European Central Bank and Federal Reserve. Apparent, Given the current economic conditions in Europe, it appears that the European Central Bank will have to remain more aggressive than the US Federal Reserve over the next six months. This scenario might continue to drive additional EUR/USD buying in the medium term. However, day traders should be mindful of the daily volatility that occurs in forex and understand the risk of reversals, such as the sell-off that occurred last week following the EUR/USD high.
Tomorrow’s EU PMI data might lead to volatility in EUR/USD
PMI readings will come out of Germany and France tomorrow. The results might affect the EUR/USD pair. Traders should pay attention to the Federal Open Market Committee statement of the US Federal Reserve next Wednesday. Further pessimism of the US Federal Reserve might prompt buying EUR/USD.
The speculative price range for EUR/USD is from 1.10975 to 1.13100
Traders should be very careful early this week considering that the Federal Reserve and European Central Bank will be making their rate announcements on Wednesday and Thursday. The highs made early last week show that there is still a belief that EUR/USD has room to run, But selling quickly also shows that volatility is present as financial institutions aim for a balanced price. The EUR/USD should be watched near 1.11000 early this week to see if the support level can be held.
Tomorrow’s PMI readings from the European Union might be a strong gauge of the direction of the EUR/USD. Day traders should understand that most financial houses have priced in the interest rate hikes from the Federal Reserve and the European Central Bank that are likely to come. What worries the big traders is the rhetoric of the two central banks regarding their respective prospects. The EUR/USD pair has been rising gradually since early June. If the current support levels hold, traders may start betting on the development of higher prices.
Buying EUR/USD is speculative, but this consideration can be useful for trading bets. However, taking positions early in the week takes a lot of risk management. If the PMI numbers from Germany tomorrow are weaker than expected, that might lead to intraday market volatility, but following that, traders are likely to start taking a stance on the FOMC statement on Wednesday, which is sure to cause a lot of movements in EUR/USD.
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