2022-06-20 12:00:52
EUR/USD WEEKLY REVIEW 20.06-24.06.2022
At the time of publication of the review, the EUR/USD currency pair is 1.04740.
Market the day before
US 10-year bond yields stabilized at around 3.25% after hitting a cyclical high of 3.497% on Tuesday. Meanwhile, 10-year German bond yields also stabilized, hitting their highest level since 2014 at 1.926% on Thursday.
In deciding to raise rates by 75 basis points on Wednesday, Federal Reserve Chairman Jerome Powell stressed that the Fed's main goal is to bring inflation back to 2% and that they will take the necessary steps to stabilize prices.
We expect
While Russia stopped gas supplies to France and reduced supplies to Italy, the increase in the USD interest rate and the increase in gas prices in Europe did not cause an active fall in the EUR, on the contrary, since the market returned to the local lows of 2016 and 2020, the EUR is in an active stage accumulation. As soon as the resistance level of 1.07870 is broken through, active growth towards the level of 1.10495 will begin.
Euro tested the previous minimum. At the moment, there is a downward trend, the volumes of sellers are large.
The currency pair, while trying for the second time to reach a low at around 1.04000, tested it and began to turn around. As a result, for this trading week, the total ups and downs amounted to about 220 points.
An important point: we are well aware that the dollar is now actively at the highs and, on the one hand, should rise in price in the long term. Plus, the interest rate has risen, but inflation is breaking records and the dollar is not very accessible to ordinary consumers.
On the other hand, the stock market falls, the interest rate rises and the dollar becomes an unbearable burden for the market.
What will happen to us in the end for EUR/USD? Of course, technically it should fall lower, but it has two options: either stay sideways with a growing dollar and fight against support and resistance. Or, regardless of the fact that the buck will grow, it can return to resistance, break through the horizontal line at 1.07870, and then start to rise to the takes at 1.10490 and 1.12200, and then you can count on further growth.
Our recommendation: wait until the resistance is broken and only after that get up for a purchase, for example, from the level of 1.08560 - 1.08600. This should be a clear breakout by the body of the daily candle of this resistance, plus a change in trend.
Thesis:
- EUR/USD breaks through the horizontal line at 1.07870;
- The currency pair starts to rise against the takes at 1.10490 and 1.12200.
Economic calendar:
Thursday
10:30 German Manufacturing PMI (June) 54.0 54.8
Friday
11:00 German IFO business climate index (June) 92.9 93.0
We see no reason for a significant EUR/USD rally this summer - perhaps the only reason for such a move could be an 8-10% drop in equity markets, leading to a significant repricing of the Fed cycle.”
“Expect volatility to remain high and EUR/USD could well rebound in the 1.0400-1.0600 range in the near term.”
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