Euro Forecast: USD Controlling EUR/USD Price Action Dismissive of Positive
Euro Forecast: USD Controlling EUR/USD Price Action Dismissive of Positive
The USD has gained a bit of momentum over the past few months as it continues to trade softer against the European currency. This has been driven by easing inflation in the US and a softening of interest rate hikes from the Federal Reserve. This is proving to be a good combination for the EUR/USD and its traders.
Despite this, the Euro is still down 6% year-to-date and trading around the parity level at the start of 2022. The Euro to Dollar exchange rate is largely controlled by factors such as interest rates, unemployment, inflation, jobs data and capital flows. However, a large part of the pricing is also related to ‘event’ risks that cannot be gauged in advance.
EUR/USD – Price Trend on D1 Chart: Upwards
The euro has been in a long-term bullish trend since the start of 2017 but has been struggling to break above the 1.04 mark, with the recent bounce above the 1.06 level offering some upside resistance for the pair. The Euro to Dollar exchange rate could strengthen further if the Dollar weakens even further and Euro strength continues.
EUR/USD – Price Action: Dismissive of Positive
The Euro is under pressure from a range of risks. A key factor weighing on the European currency is Russia’s decision to shut off the Nord Stream 1 pipeline, which effectively cut off the continent’s main energy artery and exacerbated the region’s economic crisis. This, combined with a global recession that is expected to be much slower than previously forecast, has pushed the euro below parity against the USD in September.
In response to this, the ECB lifted interest rates by 50 basis points in December and reaffirmed its commitment to hiking them further. These factors have been a big contributor to the EUR/USD strengthening, with the euro gaining 9% so far in 2019.
Looking forward: The next few months are likely to see a lot of uncertainty. The EU economy is expected to contract in both the current quarter and the following one, mainly due to higher uncertainty and tighter financing conditions.
There are also fears that the global economy may slow further if the Chinese government decides to implement its zero-Covid policy, which would stymie the country’s growth potential. Despite this, the euro remains strong thanks to the continued weakening of the greenback and its ability to serve as a safe haven.
Moreover, the Chinese economy is expected to re-open after the Lunar New Year in late January. This could help support demand in the Chinese economy which will offset a slowing US and Europe.
The Euro to Dollar exchange rate is a very complex market to predict and it can be difficult to predict where the exchange rate will go in the long run. This is because there are so many moving parts, such as ‘events’ that can affect the exchange rate. This means it is important to use the latest market data and technical analysis to make a forecast of the EUR/USD rate.
