If you're wondering where the EUR/USD is headed today, then you'll be pleased to know that the currency is expected to rally. The pair is expected to continue rising
as long as the 1.0481 resistance level continues to hold.
EUR/USD is expected to rally further as long as 1.0481 resistance turned support holds
EUR/USD has been steadily rising in recent months. It has gained close to 7% over the past three months. This is due to the general strengthening of the dollar and general eurozone economic sentiment. However, war in Eastern Europe and the Russian invasion of Ukraine have taken a toll on the eurozone economy.
The US central bank is expected to continue raising interest rates. However, a sharper than expected US recession may support the safe haven dollar. Meanwhile, the euro is expected to gain ground against the pound and low-yielding currencies. Investors are hoping the Fed will slow down its rate-raising cycle and focus on reducing inflation. Currently, the US CPI is at 7.1% YOY, which is lower than the expected rate. In November, the ECB hiked its interest rate to 1.25%, reiterating that more rate hikes are on the way.
With the ECB hawkish, investors are still worried about inflationary pressures in the eurozone. A deterioration in risk sentiment is also negatively affecting the pro cyclical euro.
Euro to dollar exchange rates have risen since early September. The euro is expected to rise against the dollar in the coming months.
Since the beginning of this year, the euro has lost 5%. Nevertheless, it has rebounded a bit, as falling US Treasury yields and general dollar weakness have helped drive the euro back up.
As long as 1.0481 resistance is held, the euro could rally further. At the same time, if the dollar weakens, the euro could fall below parity. If the euro breaks below 1.0225, it could trigger a minor double top.
The Purchasing Managers' Index (PMI) in the Euro area showed a slowdown in private sector activity in December. While this could indicate a less severe EU recession, it has also sparked a rally in the euro.
EUR/USD is expected to ease lower once peak inflation has passed in the US
The euro has been steadily declining against the dollar throughout the first half of the year. Despite a modest uptick in economic sentiment in the eurozone, the common currency is still under pressure because of a deteriorating outlook for the region.
Inflation is a big concern for the United States, and it recently reached a 40-year high. It is expected to slow down over the next few months, but it remains a long way off the Fed's target.
The Federal Reserve started raising interest rates earlier this year, and the US dollar has gained strength against major trading partners. A stronger dollar could make foreign products cheaper for American consumers, but it could also slow down growth.
However, a weaker dollar is also good for European export goods, which can be more competitive in the U.S. Because of that, Europe may end up with a trade deficit.
The euro is also facing continued pressure from the energy crisis. This has led to a significant rise in household expenses. Despite the ECB's recent hike in interest rates, inflation remains high in Europe.
Nonetheless, the US economy is robust. It is expected to grow at 3.2% for the third quarter, according to the US Bureau of Economic Analysis. Meanwhile, a sharp drop in Wall Street indexes has provided an additional boost to the greenback.
The dollar is still the leading currency in trade, and it has been benefiting from aggressive monetary policy by the Fed. If the ECB continues its rate hiking cycle, it will be forced to take a more hawkish stance.
Inflation in the euro zone is projected to continue at an elevated level. Energy prices have been a big contributor to inflation, and the October calendar offers an uptick in food and tobacco prices.
EUR/USD is turned neutral with current retreat
Euro against the US Dollar is back on the move after a week of decline. A break below the 1.03 support level would confirm a short term bottom and a pullback towards the November 21 low of 1.0225 could be in the cards.
The dollar has retreated from a multi-year high, largely thanks to a more hawkish Federal Reserve. It also continues to benefit from a global risk-aversion trade. However, the European economy is in a deeper recession than expected and the euro has yet to reach parity with the dollar.
Traders remain focused on the European Central Bank's (ECB) ability to hike interest rates in a recession. On Monday, ECB President Lagarde said that the end of negative rates in the Eurozone could happen by the third quarter of the year. This could be a game changer for the European periphery.
Meanwhile, the spread to two-year dollar rates reached its widest in mid-August. In
addition, the latest US inflation data could boost expectations for a more hawkish
EUR/USD has fallen sharply since the beginning of the year. It has reached a 20-year low on September 20. But it bounced off the retracement zone and resumed its climb.
Technical indicators have recovered, but a firm break of the 61.8% projection of 0.9729 to 1.0481 may not be enough to sustain the trend. The chart below shows that a more decisive push higher may be necessary to confirm the near-term top. Another key indicator is the RSI, which is falling below the 50-neutral mark. Similarly, MACD indicators have settled at low levels.
Today, the euro will be supported by the German Producer Price Index (PPI), which rose slightly less than expected in November. Industrial Production data, as well as Retail Sales data from the US, will offer additional impetus.
EUR/USD is expected to rally further as long as 1.196 support line holds
The EUR/USD has been trending downwards for several months. Its recent rally may be short-lived as it's likely to fall back to the support zone. But it could still bounce around the 1.1200 area.
On the data front, the US economy recovered faster than the Fed expected. However, the resurgence could be limited by one-sided positioning. While the CPI increased 0.25%, inflation was below market expectations. This is also psychologically important.
Ahead of the Fed announcement, the DXY dollar basket was on the slide. Expectations are for a 0.25 percent rate hike. Meanwhile, the euro-area is projected to see an improvement of 0.2 percent in quarterly GDP. That's below the 0.7% growth of Q2 2021.
In the EU, unemployment fell to the lowest point in 13 years, and the French economy saw a 6.2% rise in annual GDP. Positive economic news for the euro-zone will push the currency higher.
The US government's stimulus plans may be scuttled, and the economy's recovery may not be as fast as many expect. These issues create problems for the White House. Some Republicans compare the situation to stagflation under Jimmy Carter, and Democrats admit that the current recovery is chaotic.
Despite the strong bullish spike, a bearish rejection of the 1.2150 – 1.2175 level was expected. A breach of this level could pave the way for a breakout.
The price of EURUSD has also recently broken through the 1.193 level. This is a key Fibonacci level, and traders should watch for a breakdown. If so, the next stop would be a Fibonacci retracement level at 1.0396.
The Euro has been trading above the 1.1200 resistance level for 21 months. However, the long-term outlook for the pair is bleak.
EUR/USD is expected to rally further as long as 1.71 support line holds
The Euro is bouncing back after a big upswing last week. It is looking at its best month since March 2016 and is on course to break $1.20 in the near future. In the past week, the euro has climbed by 250 pips. However, the pair is also showing signs of a possible correction. There is a chance that the euro needs to go through a deeper correction and could reach its long-term support level of around $1.20.
After breaking through a major Fibonacci level at 1.0200, EUR/USD has tested its 200-day EMA. But, the pair has not yet reached the TR trend line, which runs through 1.1053. Traders should watch for a breakout below the support zone. A break below this zone would point toward a wider retracement of the recent rally.
In addition to the recent spike in the single currency, there has been some demand. This was driven by the slide in US bond yields. Also, the ECB is making clear that rate hikes will be smoother.
At the same time, the Fed is talking dovish. Powell has said that the economy is not as strong as expected and that the pace of rate hikes will slow. These comments have given the markets a positive boost. Nevertheless, some investors are hesitant to jump into long positions, fearing that the dollar will regain its position as the world's reserve currency.
Still, the euro is likely to bounce back from the current support levels. As long as the key support line at 1.0340 holds, the pair is unlikely to drop any further. Moreover, a move below the psychological round number of 1.0500 could be followed by a breakdown to a long-term support zone at 1.2140