- The EUR/USD is near the 1.08200 mark as of this writing. The currency pair started January around the 1.10415 ratio and has produced a rather solid downturn which has certainly not been welcomed by stubborn bullish traders.
- The end of January will see the U.S Federal Reserve’s FOMC Statement.
- No change is expected during the monetary policy pronouncements, but financial institutions will be keen to add to their outlooks regarding potential U.S interest rate cuts which should develop in the spring.
However, the EUR/USD is now lingering over important mid-term support levels which are a result of the Federal Reserve’s last FOMC Meeting which was concluded on the 13th of December. In the wake of the Fed rhetoric one and a half months ago, the EUR/USD produced a solid upwards climb and hit a high on the 28th of December near the 1.11410 mark.
EUR/USD Problems and Considerations
While bullish behavior sparked the upwards climb in December, January has seen the EUR/USD return to price levels which seem to indicate financial institutions have concerns about the outlook for the currency pair. Yes, the EUR/USD is largely traded in a USD centric manner and across Forex in almost every major currency pair the USD has gathered plenty of strength in January. Yet, there is a reason to suspect another element causing headwinds is skepticism regarding the monetary policy of the European Central Bank.
Headwinds have been created by poor economic data from Europe, of which Germany is a prime example, showing lackluster growth and rather sticky inflation. There have been calls on the ECB to begin lowering its key lending rate before the Federal Reserve does, but this has not happened and financial institutions may be punishing the EUR/USD with selling.
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Return to 1.0800 Price Range in EUR/USD and Speculation
- Traders may feel compelled to try and buy the EUR/USD based on the belief the trend will reverse again in the currency pair, but timing when this will happen could prove a costly bet.
- Headwinds against the EUR/USD may not continue into the mid-term, but trading in the next couple of weeks for the currency pair may remain tricky as durable support levels are sought.
If the EUR/USD were to break below the 1.0800 level and see sustained trading below, this would have to be taken as negative signal. While it may be ‘unacceptable’ for those who favor buying the EUR/USD and remain bullish, arguing against the trend until it produces evidence of stopping downwards momentum needs to be considered before trying to pursue upwards bias.
EUR/USD Outlook for February 2024:
Speculative price range for EUR/USD is 1.07230 to 1.09790
The EUR/USD appears to have suffered from the belief the currency pair was overbought in December and then concerns surrounding the ECB’s inability to create a proactive monetary policy to combat economic concerns in the European Union. The strength of the USD across the Forex market may start to run out of velocity, but trying to choose exactly when that will happen is difficult. The 1.08000 mark needs to be watched, if this level can prove durable it may start to create a flurry of speculative buying wagers. However, for the EUR/USD to gain serious momentum upwards the U.S Federal Reserve will have to sound dovish and financial institutions will have to believe the currency pair has been oversold.
While many traders may believe a fair market price for the EUR/USD should be around the 1.09500 to 1.10500 levels, this doesn’t mean the price is realistic for the time being. If the EUR/USD drops below the 1.08000 level and sees a test of the 1.07800 to 1.07500 ratios this would be surprising, but these values were seen in early December. Day traders need to be careful about short and mid-term outlook. The EUR/USD may be oversold, but it will need some impetus to produce a climb upwards as shadows continue to linger over the currency pair.
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