Having achieved a high of nearly 1.12540 on the 18th of July, the EUR/USD made highs not seen since February of 2022. Dynamic price action has been part of the EUR/USD since the start of June and its momentum upwards since trading at a low of nearly 1.06250 on the last day of May has been profound. Speculators who were wagering on upside likely became loud and optimistic; this as positive results were certainly being seen.
However since reaching the high water marks of mid-July the EUR/USD has produced rather choppy reversals lower mixed with the occasional flights higher to tempt bullish speculators again. After traversing near the 1.11500 this past Thursday, the EUR/USD suddenly moved lower and hit a low around 1.09440 on Friday. As the month of August begins traders who have been pursuing the bullish trend of the EUR/USD may be licking their wounds and wondering what is going to happen next.
Recent Price Action of EUR/USD a Reminder to Keep Risk Management in Place
The U.S Federal Reserve and ECB both raised their key lending rates last week as expected. However recent economic data from the U.S has produced better than expected growth, and this has not been the case in the European Union which is facing recessionary pressures. The mid-term outlooks for the Federal Reserve and European Central Bank are still rather fragile.
Many financial institutions believe the Fed will become less aggressive, while questions persists regarding the ECB future actions. Complexity is ruling the day, and the lack of clarity has caused some of the volatility in the EUR/USD that has been seen the past two weeks. The 1.10000 level in the EUR/USD is likely important support psychologically; bullish traders would certainly like to see this mark sustained higher.
First Week of August will be Important for EUR/USD
The first week of August could set the tone for the USD/EUR in the coming weeks. Manufacturing data will come from Europe and the U.S early this week, but on Friday the U.S will release its jobs data.
- The results of the Average Hourly Earnings should be watched from the U.S on Friday because it is a strong inflation signal.
- While many financial institutions believe the U.S Fed will become less aggressive, the higher price of Crude Oil may affect inflation data in the coming weeks too, this could also play into the value of the EUR/USD in August.
- Having reached a high above the 1.12500 level in the middle of July was important for the EUR/USD and a strong signal bullish sentiment exists, but economic data remains challenging is causing headwinds because of a lack of clarity.
EUR/USD Outlook for August 2023:
Speculative price range for EUR/USD is 1.09400 to 1.12300
The price range of the EUR/USD was volatile in July and serves as a warning for traders in August. While momentum higher certainly achieved long-term highs for the EUR/USD, the move downwards after the highs were made were fast and violent. The wide price realm of the EUR/USD may find more tranquil waters in August, but traders need to continue to practice risk management at all times.
The EUR/USD appears potentially oversold as its trades near the 1.10200 realms at this time, but traders should not be overly ambitious in their pursuit of higher prices. If U.S inflation data shows that it is decreasing this will help the EUR/USD likely gain speculative buyers, Friday’s jobs numbers from the U.S will be important. The EUR/USD has been affected by behavioral sentiment and will continue to move according to the mid-term outlooks of financial institutions as they try to find clarity regarding Fed and ECB policy.
Ready to trade our Forex forecast for the coming month? We’ve shortlisted the best Forex trading brokers in the industry for you.
