Foreign exchange market update: EUR/USD

EUR/USD in the focus

In addition to geopolitical issues and runaway inflation, the markets are increasingly focusing on the interest rate decisions of the national banks. Last week, the European Central Bank already cautiously prepared the market for potentially higher interest rates. This week, the next interest rate meeting of the U.S. Federal Reserve is on the agenda.

The speculation about higher interest rates, especially in the U.S., continue and various analysts expect interest rate increases of up to 1.5% in 2022. Whether this scenario can occur will be answered on Thursday. However, we should not be surprised if the central bank, despite high inflation, falls into a “wait and see” mode due to many negative external factors and moves carefully for the time being.

For EUR/USD, this could be a strong signal for stabilization and potentially also a trend reversal if market expectations are disappointed.

Downward trend since 2021

From a chart perspective, we have now been in a sideways market for 5 years. Currently, we have been in a downward trend since 2021. After the strong sell-off of the euro, a bottom could be reached in the area of 1.0800/1.0900, provided that the US Federal Reserve (FED) increases the interest rate less than expected.

Support 1,0920-1,0950
Support 1,0780-1,0820

Resistance 1,1440-1,1500
Resistance 1,1720-1,1800

The chart below shows a potential bottom formation in EUR/USD:

Source: TradingView

Geopolitics, inflation, central banks are the three keywords that will accompany us in the coming weeks and which will significantly influence the EUR/USD exchange rate. Keep these three topics in focus to navigate through this volatile time.

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Disclaimer:
Please note that this elaboration was completed on 14/03/2022 11:08 CET.
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