EURUSD: Fed's week

(Vasilis Tsaprounis – TopFX)

Subdued trading for the pair as for the umpteenth time the single European currency fails to sustain its gains above the 1/1 level.

The week shows that starts with a repeating pattern on the trading of the pair.

The common European currency had once again reacted and returned above the level of 1/1 but without being able to maintain more upward dynamic.

The basic questions that remain in the market continue to weigh on the euro and beyond the good reactions it show particular difficulty to move far away from levels below the 1/1.

Energy crisis which hits the European economy more and losses in the stock markets continue to be in favor to US currency.

On the other hand, concerns continue to grow about the course of the US economy, with some major Investment banks reducing their forecasts for the growth rates.

This week is marked by the expected announcement of the increase in interest rates by the US Federal Reserve Bank on Wednesday.

The base scenario estimates are for a 75 basis point increase, with bets for 100 points remaining in the market but very limited.

It is understood that any surprise like a 100 points rate hike will result in a strong reaction of the exchange rate and a strong rally in favor of the US currency.

Apart from the announcement of new housing starts in the US on Tuesday we do not expect any other major macroeconomic news and for that reason markets most probably will be on hold and we will not see extreme prices before Wednesday.

The mildly bearish momentum of the common European currency is expected to remain in the game once again, followed by reactions.

For this reason the basic strategy for buying on dips continues to be of the recommended ones as the high fidelity on Euro reactions continues to exist.

EUR/USD Forecast: Euro bears regain control following correction

(Eren Sengezer – FXStreet)

– EUR/USD has declined below parity at the beginning of the week.

– Near-term technical outlook points to a buildup of bearish momentum.

– Additional losses could be witnessed if 0.9950 support fails.

After having managed to post small gains in the last three trading days of the previous week, EUR/USD has turned south early Monday and declined below parity. The near-term technical outlook shows that buyers remain hesitant. In the absence of high-tier macroeconomic data releases, the risk perception could influence the pair’s action in the second half of the day.

Ahead of the weekend, the University of Michigan’s Consumer Sentiment Survey for September showed consumers’ one-year and five-year inflation expectations declined to 4.6% and 2.8%, respectively. Although the dollar weakened modestly, these figures don’t seem to be having a significant impact on the market pricing of the Fed’s rate decision. According to the CME Group FedWatch Tool, there is a 20% probability that the US central bank could hike its policy rate by 100 basis points on Wednesday.

Heightened fears over a global recession and escalating geopolitical tensions weigh on market mood early Monday. Over the weekend, US President Joe Biden said the US military would defend Taiwan in the event of an invasion by China. In response to this statement, China’s Foreign Ministry said on Monday that Beijing “deplores and firmly opposes this and has lodged stern representations.”

Reflecting the risk-averse market environment, US stock index futures are down between 0.7% and 0.9%. In case Wall Street’s main indexes suffer heavy losses after the opening bell, the dollar should be able to preserve its strength.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the four-hour chart dropped below 50 and the last four-hour EUR/USD candle closed below the 100-period and 20-period SMAs, highlighting the bearish bias.

0.9950 (lower limit of the one-week-old range, static level) aligns as initial support. If this level turns into resistance, EUR/USD could slide toward 0.9900 (psychological level) and 0.9865 (September 6 low).

On the upside, 1.0000 (psychological level, 100-period SMA) forms significant resistance. In order to extend its rebound, the pair needs to stabilize above that level. In that case, 1.0030/40 (Fibonacci 50% retracement of the latest uptrend, 50-period SMA) and 1.0070 (200-period SMA, Fibonacci 38.2% retracement) could be targeted.

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