- The bearish stability still dominates the performance of the EUR/USD currency pair since the start of trading this week.
- According to its performance, it fell to the 1.0122 support level before settling around the 1.0180 level at the time of writing the analysis.
- Performance supported by investors' appetite to buy the US dollar as a safe haven, in addition to strong expectations for the future tightening of the US Federal Reserve's policy.
EUR/USD Forecast for Coming Days
The rise of the US dollar will continue and ensure that the euro remains under pressure, according to new research from Swedbank. The Scandinavian bank and investment bank say it is maintaining its EUR/USD exchange rate forecast to stay on course to test the parity rate 1.0 support. Anders Eklöf, chief forex analyst at Swedbank, says, “The notion that the peak of headline inflation in the US would be enough to calm the Fed is wishful thinking. US dollar longs were lowered, and pricing showed less than 50/50 gain of 75 basis points in September. We see continued demand for the US dollar when buying and the challenge, and therefore the future outlook in Europe / China, and the EURUSD is back to parity.”
These forecasts come after a period of respite for the euro that saw its advance against the dollar during most of July and the first half of August. The rise reached its peak on the background of data from the United States of America, which showed that inflation rates have reached their highest levels, and with it the US Federal Reserve interest rate hike cycle.
For the forex and financial markets in general, the Fed's shift to smaller rate increases will represent a key moment, allowing investors to become increasingly confident of the end of the hiking cycle. Meanwhile, the Fed's bullish cycle has been the mainstay of the US dollar's strength, so its demise could mean a turn in the direction of the EUR/USD.
“The long dollar position was further reduced last week after US inflation data, which came in less than expected,” the bank analyst added. The rate-sensitive part of the US economy is slowing but with core inflation running at 5 per cent momentum in the past three months and a tight labor market.” Swedbank economists note that the market is currently priced in for another potential 75 basis point hike in the Fed in September, followed by further hikes to push the money rate to a peak of 3.6% in early 2023.
From there, it is expected to stop before cutting.
However, “we believe the risk if anything is tilted to the upside at this rate, which should support the US dollar,” and in relation to the euro, Swedbank says the challenges facing the eurozone are enormous as the rising cost of living of energy digs Deep holes in real income and it appears that export demand from China remains sluggish. They also say there is a clear risk that Germany will run out of natural gas in the winter.
Therefore, the EUR/USD rally in July-August appears to have faded as Eurozone energy prices rose again and the exchange rate fell again. The lowest level for the EUR/USD pair in 2022 is at the 0.9954 support.
EUR/USD analysis:
The bearish stability still dominates the performance of the EUR/USD pair. The rush towards the parity price is still possible if the current weakness factors. These are the strong economic performance of the United States and a sharp tightening path of the Fed’s policy, in addition to pressure on the euro area due to Russian energy. The current trend hit 1.0000. With the continuation of these factors, any attempts by the Euro-dollar to rebound to the highest opportunity to sell again will remain.
The nearest resistance levels for the EUR/USD today are 1.0230 and 1.0345, respectively. The currency pair will be affected today by the release of inflation figures in the euro zone, the reading of the Philadelphia industrial index and the number of US weekly jobless claims.
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