Foreign exchange market update: EUR/USD 1.0000 or not?
- Currency exchange
EUR/USD 1.0000 or maybe not?
The foreign exchange market is torn, where is the EUR/USD exchange rate going? Just when nobody was expecting it anymore, the EUR was able to get some breathing space and has not fallen below the important level of EUR/USD 1.0350.
The currency watchdogs in Europe made a corresponding contribution. The bond-buying program of the European Central Bank (ECB) could expire as early as June, paving the way for a rate hike in July. Due to the galloping inflation, those voices that can even imagine a rate hike of 50 basis points are getting louder. Just a few months ago this was considered an unrealistic scenario.
In contrast to the US central bank, the ECB has only one mandate: price stability with an inflation rate of around 2%. Not only rising prices but also the strong USD (inflation is imported through a strong USD) are currently causing prices to explode. It is still too early to make any forecasts regarding further interest rate policies, but there are indications of a turnaround in interest rates in Europe.
Forming a bottom at 1.0350
From a chart technical point of view, EUR/USD did not fall below the low from 2016/2017. This well could be a sign that the market is trying to form a bottom at this level. This can eventually help the EUR to attract further buying in the coming months.
The chart below shows the lows from 2016/17 and 2022 in EUR/USD:
An unexpected turnaround in interest rates in Europe, oil prices and inflation at record levels and a never-ending dispute in Ukraine – these are currently the most important factors for the next few weeks. If there are any signs of serious changes in these three areas, it may catapult the EUR/USD decisively in one direction or the other.
Please note that this elaboration was completed on 01/06/2022 13:54 CET.
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