by The Bulls Eye on US Economic Data The EUR/USD exchange rate has been bullish for the past 120 days, but this trend may end. As the US economic data improves and the FED continues to raise interest rates, the US dollar is expected to gain against the euro. This shift could mean that if you hold US dollars, they will become worth more concerning the euro, and vice versa.
The Fight Against Inflation Continues
According to FED policymaker Waller, the fight against inflation is far from over, which might be a long fight. The Federal Reserve policymakers have been raising interest rates and tightening monetary policy to curb inflation and maintain stability in the financial markets.
However, the situation is different in the European Union (EU), where the European Central Bank (ECB) is taking a more relaxed approach. Klaas Knot, a member of the ECB, acknowledges the signs of a contracting housing market and credit facilities in the sector. However, he notes that the ECB is in a better position than the FED and believes that the EU economy is better prepared to handle inflationary pressures.
This difference in approach between the FED and ECB impacts the EUR/USD exchange rate. The bullish comment from Knot has provided support for the euro and is seen as a positive sign for the currency, potentially leading to further gains against the US dollar.
EUR/USD Exchange Rate Analysis
Recently, the EUR/USD exchange rate breached the 1.10 level after the Federal Open Market Committee (FOMC) meeting last Wednesday, where the chairman of the Federal Reserve hinted that they might reduce rate hikes if the economic data warrants it.
This news pushed the pair higher, but it was short-lived as the bearish reversal took hold on Friday. The reversal was triggered by key US economic data, which showed improvement in various sectors and reduced fears of a recession.
This bearish reversal caused the EUR/USD exchange rate to decline, and it will be interesting to see how it performs in the future. The outcome of the fight against inflation and the decisions made by the Federal Reserve and the ECB will play a crucial role in determining the future of the exchange rate. As the economic landscape evolves, investors and stakeholders should be ready for the ups and downs in the currency market.
The decline of the EUR/USD exchange rate to 1.07 this week resulted in the breach of the 200 Simple Moving Average (SMA), which had acted as the last supporting line for the currency pair. The 200 SMA had supported the EUR/USD during the previous week, but now it has transformed into resistance.
This bearish reversal has caused the pair to lose momentum, and many traders are closely monitoring the market to see if the bearish trend will continue. On the other hand, if the pair reverses its trend and bounces back above the 200 SMA, it could indicate a recovery in the market.
Despite the recent bearish reversal, the daily chart for the EUR/USD exchange rate remains bullish. Analysts believe that the movement seen in the past four months is a preliminary indication of a larger bullish trend. The market is waiting for more economic data to clarify the direction of the exchange rate. However, the overall trend remains very active.
