In today’s trading session, the EUR/USD currency pair is continuing its retreat, marking its third consecutive session in the red. The pair, having touched fresh six-month lows, is currently situated around the 1.0615 region. Should it break below this threshold in the imminent future, it might pave the way for further descent towards its previous March low of approximately 1.0516, registered on the 8th of that month. This specific low serves as a critical defense line, and any breach could have the pair targeting the year’s low set at 1.0481, observed on January 6.
The currency pair’s downside appears to be fueled by its positioning below the pivotal 200-day Simple Moving Average (SMA), which is pegged at 1.0828. As long as the pair remains beneath this crucial level, it’s poised for further weakness.
Insights from SocGen:
Kit Juckes, the Chief Global FX Strategist at Société Générale, has provided some pertinent insights into the current FX market landscape. The US Dollar’s current strength can be attributed to several factors, including the rising yields emanating from bond sales by the Treasury, the subsequent influx of money into the USD, and the overall fiscal and monetary policy mix aimed at supporting the dollar’s bullish run.
Moreover, Juckes notes the USD’s potential to further climb in the face of “US economic exceptionalism.” In his forecast, he suggests that if current trajectories persist, the EUR/USD could very well approach parity. In addition, there’s speculation around the USD/JPY possibly breaching the 150 mark, unless there’s intervention by the Japanese authorities.
USD’s Trajectory According to HSBC:
HSBC’s team of economists predict that the USD will continue to gain ground in the upcoming months and possibly into 2024. They project a strengthening stance of the USD, particularly against the EUR and GBP. The reasoning behind this is twofold. Firstly, relative policy expectations may increasingly tilt in the USD’s favor. Secondly, while the EUR and GBP’s cyclical support appears to be waning, the USD seems to be banking on the robustness of its economy to sustain its current rally.
From a policy rate perspective, HSBC’s projection does not foresee any imminent changes until mid-2024. However, starting in the third quarter of 2024, they anticipate a rate cut of approximately 50 basis points.
The EUR/USD pair’s downward trajectory is a testament to the prevailing strength of the US Dollar, with technical indicators further underscoring the bearish momentum for the pair. Opinions from renowned financial institutions like SocGen and HSBC also point to a sustained bullish outlook for the USD. Traders and analysts alike will be keenly observing the movements of the EUR/USD, particularly in relation to the crucial levels highlighted.
TRADE IDEA DETAILS
CURRENCY PAIR: EUR/USD
CURRENT TREND: Bearish
TRADE SIGNAL: SELL
👉ENTRY PRICE: 1.0615 (current price, but would ideally wait for confirmation of a break below this level)
✅TAKE PROFIT: 1.0516 (March low, and then potentially 1.0481 if it breaks the March low)
❌STOP LOSS: 1.0665 (A slight buffer above the current level to give the trade some room)
ANALYSIS:
The EUR/USD has shown a bearish momentum, backed by both technical and fundamental factors. The currency pair has been on a decline, marked by its positioning below the critical 200-day SMA. SocGen’s prediction about the pair possibly reaching parity and HSBC’s prediction of USD strengthening further support a bearish sentiment.
FINAL THOUGHTS:
Given the current scenario, a sell trade on the EUR/USD seems favorable. However, like any trade, it’s essential to manage risk and keep updated with global economic news that can influence currency movements.