EUR/USD: In Search of a New Bottom
Last week, all the attention of the markets was focused on the FOMC meeting of the US Federal Reserve, which took place on September 21. The probability of another rate hike by 75 basis points (bp) had been estimated at 74%, and by 100 bps at 26%. The first forecast turned out to be correct: the rate was increased from 2.50% to 3.25%. But this was enough for the DXY dollar index to fly up and exceed 113.00 points, updating another 20-year high. Accordingly, as expected by the majority (75%) of experts, EUR/USD has renewed another 20-year low, reaching the bottom at 0.9667.
EUR/USD: Ahead of the US Federal Reserve FOMC Meeting
The World Bank said last week that risks of a recession in 2023 are growing amid simultaneous tightening of monetary policy by the world's leading Central banks and the energy crisis in Europe. According to Citigroup strategists, the dollar remains the only safe haven for investors to hedge against the risk of drawdown in investment portfolios.
EUR/USD: Two Events of the Week
The past week was marked by two significant events. First, the EUR/USD pair updated its 20-year low on Tuesday, September 06 once again, falling to 0.9863. And then the European Central Bank raised its key interest rate for the first time in its history by 75 basis points (bp) to 1.25% on Thursday, September 08, accompanying this act with very hawkish comments.
EUR/USD: Rather Boring Week
The past week was, boring, so to say. The macro statistics released from August 30 to September 2, although versatile, turned out to be quite close to market expectations. For example, the harmonized consumer price index in Germany, was 8.8%, with the forecast of 8.8%. The consumer price index in the Eurozone amounted to 9.1% instead of the expected 9.0%. The index of business activity in the US manufacturing sector (PMI) did not change at all over the month and amounted to 52.8 (forecast 52.0), and the number of new jobs created outside the American agricultural sector (NFP) did not go far from the expected either, 315K against 300K. As a result, EUR/USD was moving along the parity line of 1.0000 all five days, fluctuating in the range of 0.9910-1.0078, and completed the five-day period at the level of 0.9955.
EUR/USD: The Global Economy Is in Danger Again
So, EUR/USD broke through the key support level formed in 2016. It fixed a low at 0.9899 on Tuesday, August 23, the low the pair traded 20 years ago, in November-December 2002. The euro lost about 485 points to the dollar lover the past year alone.
EUR/USD: Back to 1:1 Parity
EUR/USD has been moving sideways in the 1.0100-1.0270 channel for more than three weeks. All attempts to break through its upper or lower border ended in failure. This movement continued until August 10, when, after the publication of data on inflation in the US, the pair went up sharply, turning the level of 1.0270 from resistance into support. However, the bulls' joy was short-lived. Just two days later, the pair returned to the channel, broke through its lower border on Thursday, August 18, and ended the week at 1.0039.
EUR/USD: Weak Inflation Weakens Dollar
EUR/USD has been moving sideways in the 1.0100-1.0270 channel for more than three weeks. Attempts to break through its upper or lower border ended in failure each time. Even very strong data on the US labor market, which came out in the first week of August, did not help the dollar. Recall that unemployment in the US has remained at 3.6% since March, which is a very good indicator. And it became even lower in July, 3.5%. And such an important indicator as NFP, the number of new jobs created outside the agricultural sector, with a forecast of 250K, actually reached 528K. And this despite the fact that it was 372K a month earlier.
EUR/USD: Unexpected Positive News from the US
EUR/USD has been moving sideways in the 1.0100-1.0270 channel for almost three weeks. Timid attempts to break through the upper or lower border of the channel have ended in failure each time. Could it be the summer holiday season to blame? Most likely, the reason is the unexpected economic statistics from the US and the vague prospects that have caused the market confusion.
EUR/USD: FOMC Meeting Results: Why the Dollar Is Falling and Stocks Are Rising
So, the meeting of the FOMC (Federal Open Market Committee) of the US Federal Reserve took place on Wednesday, July 27. There were no doubts that the key interest rate would be raised. But how much? By 100 basis points (bp), which has not happened since 1981, or by 75? It seems that the markets were counting on the first option, but the Fed went for the second, softer one. As a result, instead of a new assault on the 1.0000 horizon by the EUR/USD pair, it went up and returned to the 1.0150-1.0270 channel, where it had been moving since July 19. This was followed by an unsuccessful attempt by the bears to break through the lower border of the channel (the reasons are explained below, in the review for the GBP/USD pair) and the finish, which took place at the level of 1.0221.
EUR/USD: The ECB's Monetary Experiment: Crossing a Hawk with a Dove
The single European currency showed slight growth at the beginning of last week, fixing a local high at 1.0272. There are three reasons for this. The first and most banal one is a corrective rebound after the EUR/USD pair, having broken through the parity level of 1.0000, found the bottom at 0.9951 on July 14. The second one is the resumption of Russian gas supplies to the EU via the Nord Stream pipeline. And finally, the third and most important one is the expectation of a rise in the euro interest rate. Moreover, the market expected that the rate would be raised by 50 basis points (bp) at once, and not by 25, as announced by the ECB itself at its previous meeting. This is what happened in reality. For the first time in 13 years, the European regulator raised the lending rate from 0 to 0.5% on Thursday, July 21, and brought the deposit rate out of the negative zone, raising it from -0.5% to 0%.
EUR/USD: Parity 1:1 Achieved
What we've been talking about over the last few months has come true: the EUR/USD hit 1.0000 on Tuesday, July 12. The local bottom was fixed on Thursday July 14 at 0.9951. The last time the pair was so low was in December 2002. Note that the dollar strengthened not only against the euro, but also against other leading world currencies. The DXY index is also in the zone of 20-year highs, having approached the height of 108.99 on July 14.
EUR/USD: One Step to 1.0000
We have repeatedly written about the dollar's desire to achieve parity with the euro 1:1. But we did not expect that this could happen so quickly: the EUR/USD pair found a local bottom at the level of 1.0071 on Friday, July 08. Only 71 points remained until 1.0000. The last time it was so low was in December 2002.
EUR/USD: The Dollar Is Gaining Strength Again
The EUR/USD pair moved in a sideways channel of 1.0500-1.0600 for a week and a half. However, it is clear that neither investors nor speculators are interested in such stagnation. But some kind of trigger is needed to break out of it.
EUR/USD: Just a Calm Week
The last week was quite calm for the EUR/USD pair. It moved along the Pivot Point 1.0500, and the maximum range of fluctuations was less than 140 points (1.0468-1.0605), which is quite small for today.
EUR/USD: Fed FOMC Meeting Results
Last week's events were based on Friday, June 10, when US inflation statistics were released, which amounted to 8.6% against the expected 8.3%. Having learned these disturbing data, market participants began to include in dollar quotes the possibility of raising the interest rate by 0.75% instead of the previously predicted 0.5%. Some hotheads even talked about its increase by 1.0% straight away. As a result, the FOMC (Federal Open Market Committee) at its meeting on Wednesday, June 15, raised the key rate to 1.75%, that is, by 0.75%.
EUR/USD: We Are Waiting for the Fed Meeting
The movement of the EUR/USD pair from May 23 to June 09 can be considered as sideways in the range of 1.0640-1.0760 (several false breakdowns in both directions do not count). However, this relative calm ended after the meeting of the Board of the European Central Bank on Thursday June 09. The markets woke up, the pair flew down, and having dropped by more than 200 points by mid-Friday, it froze in anticipation of US inflation data.
EUR/USD: Inflation and Labor Market Decide It All
The total result of the week can be considered close to zero. If the EUR/USD pair completed the previous five-day period at 1.0730, the final chord sounded at 1.0720 this time. At the same time, we cannot say that the past week was very boring: the maximum volatility was 160 points, 1.0786 at the high and 1.0626 at the low.
EUR/USD: Fed's "Boring" FOMC Protocol
The DXY dollar index hit a multi-year high of 105.05 on Friday, May 13, after a six-week rise. The last time it climbed this high was 20 years ago. However, a reversal followed, and it was already at the level of 101.50 exactly two weeks later. Following the general trend, the EUR/USD pair has also been growing since May 13, reaching the height of 1.0764 on May 27. The euro has pushed the dollar by 415 points during this time. And this is not at all the European currency that did it, but the American one. More specifically, the US Federal Reserve.
EUR/USD: Growth of the Pair as a Result of DXY Correction
The DXY dollar index hit a multi-year high of 105.05 on Friday, May 13 after a six-week rise. The last time it climbed this high was 20 years ago. However, a reversal followed, and the DXY was below the 103.00 horizon on May 19-20. According to a number of analysts, such a drop is more likely the result of a technical correction, and not a consequence of changes in fundamental factors. The latter still remain on the side of the American currency. However, there are already some alarming signals here, as the sharp tightening of the Fed's monetary policy increases concerns about the growth of the US economy and increases the likelihood of a recession.
EUR/USD: On the Way to 1.0000
The dollar continues to rise, while the EUR/USD pair continues to fall. The DXY dollar index crept close to 104.9 on Thursday, May 12. The last time it climbed this high was 20 years ago. The pair found the bottom at the level of 1.0349, in the area of the lows of December 2016 - January 2017. A little more, and following DXY, it will get to where it traded 20 years ago. And there, parity 1:1 is just a stone's throw away.
EUR/USD: A week of Many Multi-Year Records
Although some hotheads, such as James Bullard, the head of the Federal Reserve Bank of St. Louis, believed that the interest rate could be raised by 0.75% straight away, everything happened as the market expected. Following the May 4 meeting, the FOMC (Federal Open Market Committee) raised the federal funds rate by 0.5% to 1.0%. This increase was the largest since May 2000, as the US Central Bank has been changing the rate in steps of 0.25% for the last 22 years.
EUR/USD: Euro Updates Five-Year Low, We Are Waiting for the Fed (FOMC) Meeting
The DXY index that measures the US dollar against a basket of six other major currencies updated its 20-year high on Thursday, April 28. The reason for this growth is still the same, and we have repeatedly written about it: the Fed began to tighten its monetary policy earlier than other major central banks. It is expected that the FOMC (Federal Open Market Committee) may raise the key interest rate by 0.5% at the next meeting on May 4. This is the minimum. For example, James Bullard, the head of the Federal Reserve Bank of St. Louis, did not rule out that the rate could be raised by 0.75% straight away.
EUR/USD: Words Drive Trends
The main drivers of the past week were statements by important ECB and FRS officials. However, the beginning of the five-day period was relatively calm: the Easter weekend had its effect. Unlike the United States, Europe rested not only on Friday April 15, but also on Monday 18. The dollar was slightly supported on Monday by the comments from the representatives of the American regulator. According to Rafael Bostic, President of the Federal Reserve Bank of Atlanta, the base interest rate may be about 1.75% by the end of 2022, and Chicago Fed President Charles Evans believes that it will reach 2.25-2.50%. And the head of the Federal Reserve Bank of St. Louis, James Bullard, announced a possible rise in the key rate by 0.75% immediately at the May meeting of the FOMC (Federal Open Market Committee).
EUR/USD: Fed's Apples and ECB's Oranges
The dollar continues to strengthen, while the EUR/USD pair moves down. A week's low was recorded at 1.0757 after the ECB meeting on Thursday, April 14. After correction, the final chord, sounded at around 1.0808.
EUR/USD: Three reasons for the Strengthening of the Dollar
The proponents of a stronger dollar won by a very small margin in the previous forecast. 50% of analysts voted for its growth, 40% were against and 10% took a neutral position. The reason for such uncertainty and disagreement was that the market seemed to have already taken into account the increase in the dollar interest rate in 2022 for the quotes. However, despite this, the US currency has continued its growth. The DXY index has gained about 2% over the last week, and the EUR/USD pair, as predicted by bearish supporters, has broken through the support in the 1.0950-1.1000 zone and is aiming at the March 07 low of 1.0805. True, it has not yet managed to reach it, and the pair finished at 1.0874.
EUR/USD: Too Much Uncertainty
The movement of major currencies was determined throughout March by reports from the Russian-Ukrainian front, the sanctions-energy war with Russia, and the pace of monetary tightening. The US dollar has strengthened significantly in recent months thanks to a sharp increase in the yield of US government bonds and signals about an increase in the Fed's interest rate. The EUR/USD pair fell to 1.0805 on March 07, its lowest level since mid-May 2020. However, then the growth of the dollar stopped, and the pair moved to a sideways movement along the Pivot Point 1.1000. The hawkish statements of the Fed management pushed the pair down, the hopes for resolving the armed conflict between Russia and Ukraine sent it above this line.
EUR/USD: A Tangle of Chaos and Paradoxes
The title of the previous EUR/USD review had a question of whether the market has gone crazy. Many analysts agreed that financial markets behaved at least illogically following the March Fed meeting. And at most, it's just absurd.
EUR/USD: Has the Market Gone Crazy?
What happened in the market after the US Federal Reserve meeting can be called "the theater of the absurd". As expected, the regulator raised the key interest rate from 0.25% to 0.5% on Wednesday, March 16, for the first time since 2018. As expected, the dollar began to strengthen after that. But what no one expected was that the strengthening will last only about an hour and will amount to some 50 points. After that, it will be not the American, but the European currency that will begin to grow. As a result, the EUR/USD pair will fix a weekly high at 1.1137 the next day.
EUR/USD: Mega Event of the Week: US Federal Reserve Meeting
As expected, the main event of the past week was Thursday, March 10th, thanks to the meeting of the European Central Bank. The interest rate was left at the same level of 0%, and this was no surprise to anyone. But despite the absolute predictability of this decision, the EUR/USD pair first soared to 1.1120 after the statement of the regulator, and then fell below 1.1000. It's all about the failed attempt to "feed" both hawks and doves.
EUR/USD: The Fate of the Euro Is Decided in Ukraine
Macro statistics were mixed last week. But few people pay attention to it at the moment. The dynamics of European currencies is determined by what is happening in Ukraine for the second week now. The escalation of the Russian-Ukrainian armed conflict is intensifying, increasing the demand for risk-free assets. And it is the dollar that acts as such, not the pan-European currency.
