The following is worse; the euro's decline is still ongoing; and in this instance, the dollar is outperforming
Today, we'll discuss our technical perspective on the changes that the Euro and the Dollar have exhibited.
What are the possibilities for the dollar in the future?
The data show that inflation, which is the primary determinant of pricing and its results, including both growth and interest rate policy, is cyclically altering. A recession in the US has been adversely priced. Good employment subsequently encouraged political and economic actors' rejection of stagnation.
After then, it was believed that when inflation begins to decline slightly from its peak, we shouldn't be very alarmed. The dollar sank throughout this process and in recent weeks, while indices increased. But this past week, everything changed.
The currency index is once more climbing
The US dollar index kept its short-term support level at 105, and this week it again came close to $107, recouping its losses. The troubles in other significant economies, like China, England, and the Eurozone, are what caused the dollar to stop declining last week and start rising again.
Euro under strain
The US, the Eurozone, and the UK are experiencing the greatest levels of inflation in a long time. The Bank of England seemed to be anticipating a recession rather than being upbeat about inflation.
Although the Eurozone's second-quarter growth was stronger than anticipated, the second half of the year, and particularly the final quarter, are very risky for the area. The principal cause of this is the index is once more climbing
The US dollar index kept its short-term support level at 105, and this week it again came close to $107, recouping its losses. The troubles in other significant economies, like China, England, and the Eurozone, are what caused the dollar to stop declining last week and start rising again.
Euro under strain
The US, the Eurozone, and the UK are experiencing the greatest levels of inflation in a long time. The Bank of England seemed to be anticipating a recession rather than being upbeat about inflation.
Although the Eurozone's second-quarter growth was stronger than anticipated, the second half of the year, and particularly the final quarter, are very risky for the area. The principal cause of this is the confrontation over energy with Russia.
Germany's economy, which has been the finest in the region in years, has slowed down, and investor confidence has decreased. A 14-year low was reached by the Zew index. Additionally, inflation may continue to be strong because wintertime price increases will affect consumers more.
Another risk is that the economic slowdown could get worse if Germany and Russia are unable to reach an agreement on the energy flow issue, as they did in the second quarter. The euro is significantly impacted by the unrest in Germany.
The epidemic caused China's inflation to reach its highest levels, but China's key concern is how to prevent the abrupt implosion of the bubble that has formed in the real estate industry. China, which provided the sector with financing last year, is currently keeping interest rates low to ensure the sector's survival.
The remainder of the sectors, from industry to retail, are not doing as well, though. In fact, this gloomy forecast caused Brent crude to fall 5% yesterday.
The US economy is in a horrible spot, but the issues in Europe are more complicated. The issues facing several nations with various dynamics are getting worse.
The significance of FOMC meeting minutes
In both June and July, the Fed increased interest rates by 75 basis points, putting the economy into the most aggressive interest rate environment in more than 30 years.
After positive jobs data and decreased employment, markets increased their odds of a 50bp rate increase. However, there is a theory that is currently gaining traction: if the employment sector is doing well, the Fed may keep moving ahead of the market to speed up the decrease in inflation.
Powell claimed at the July meeting that they were committed to fighting inflation, but it was obvious that they were also worried about a slowdown in growth. What must be done, however, is obvious: growth must be supported after inflation is reduced. Besides that, Growth has no purpose. With this sound reasoning, hawkish Fed minutes for July are anticipated.
The euro/dollar exchange rate may drop faster.
We think it's helpful to look at both the long and short term outlooks for the dollar index before going on to the outlook for the pair.
The post-2008 movement, or the long term, is seen on the first chart. As we can see, the price is heading for the channel's upper band as the uptrend is strong. When we consider the longer-term trend, $113 is our primary objective. Protecting level 97.50 is crucial on the road to this level.
What are the critical levels between 97.50 and 113?
In our earlier study, we noted that we were moving upward, past the 97.50 level, towards the 103.50 level. We defend our viewpoint. In the short term, purchasing may continue in the direction of 108.50 if temporary support at 103.50 is sustained.
USD Index for August 16
USD Index for August 16
The level below 1 may be retested by the pair.
Once more, it is better to consider the couple over the long run. The trend is still moving downward. The pair, however, was unable to retain the levels of 1.0760 at first, and then 1.0370 when looking at the scenario in the short run. Today, the price has dropped to the 1.01 level after gradually falling below these resistances.
In the long run, EUR/USD
USD/EUR in the long term
The Federal Reserve officials' remarks, the Euro and dollar data, and the overall view will all cause volatility in the upcoming session, which may range from 1.0370 to 0.9650. We anticipate that the decline will go on and that it will first test the intermediate support level of 0.9950. Additionally, 0.9650 is a solid support and is crucial for the remainder of the year in our opinion.
Euro/Dollar Exchange Rates for August 16
