EUR/USD Rebounds from Monday’s 20 Year Lows

  • EURUSD
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  • USDOLLAR
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EUR/USD Analysis

The historic 75 basis point rate hike by the Fed last Wednesday, along with the hawkish rhetoric and upgraded policy path, have reasserted the US Dollar's dominance against basically everything. It also reignited recession fears, since policy makers essentially gave up on a soft landing.

This sent EUR/USD to its worst week of the year and the new one started in similar fashion, with the pair dropping to its lowest levels since June 2002 on Monday (0.9552), before covering some of its losses.

The European central bank has also moved aggressively on rates over the last couple of months though and has pointed to more hikes ahead, while policy makers have started showing concern over the decline of the Euro recently.

Ms Lagarde reiterated those points yesterday, saying that "we expect to raise interest rates further over the next several meetings" and that the "The depreciation of the euro has also added to the build-up of inflationary pressures". [1]

EUR/USD takes advantage of this commentary and the greenback's deflation today, staging a rebound, while the Relative Strength Index breaks above 50. This can lead to new weekly highs (0.9701-4), which will allow it to look towards 0.9798-0.9800 and the 38.2% Fibonacci of the September plunge. However, it will need daily closes above the EMA100 in the mid-0.9700s, for the immediate downside bias to pause.

Despite today's upbeat mood, it is hard to see a sustained recovery under current conditions and EUR/USD remains in risk of fresh pressure towards 0.9552, although sub-0.9483 moves may prove elusive in the near term.

From today's economic calendar, US durable goods stand out, while new specch by Ms Lagarde is also expected.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

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Retrieved 26 Nov 2022 https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220926_1~0bd6fcc86c.en.html

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