- The price of the currency pair EUR/USD is still stable in its bearish trend below the support level of 0.9700, near the lowest in 20 years.
- The US dollar is still stronger with expectations of raising US interest rates and positive results of US economic data.
- This confirms the solidity of the US economy despite the tightening continuing Federal Reserve.
On the other hand, the euro area is vulnerable to economic stagnation in light of the consequences of the Russian-Ukrainian war, which prevented the bloc's main energy sources, which were coming from Russia.
EUR/USD not expected to reverse yet
Among the factors of negative influence on the most popular currency pair in the forex market. HSBC sells EUR/USD, expects to retest 2022 lows as recent rally is seen as putting pressure on the position on early hopes for the Fed pivot, rather than representing a trend change. HSBC has advocated the euro's downward trend for over a year and doesn't think it is expected to reverse yet.
"The key components that underpinned the strength of the US dollar - weak global growth dynamics, fragile risk appetite, and relatively high US yields - should continue in the coming months," says Dominic Banning, head of forex research at HSBC in London.
According to the performance, the exchange rate of the euro against the dollar (EUR/USD) fell to 0.9535 on September 28, before recovering again below parity. The rally has faded since then and the EUR/USD has fallen for four consecutive days at the time of writing, back to 0.9716. HSBC has opened its new sell recommendation at 0.9915, near the top of the rebound: therefore, the bank analyst adds, “There is unlikely to be a Fed pivot at this juncture, while European data continues to deteriorate and surprisingly noticeably to the downside.”
The Federal Reserve is leaning towards raising US interest rates by another 75 basis points at the November FOMC meeting, as money markets indicate that a 50 basis point rate hike is likely in December in an ongoing effort to bring down inflation. The additional increases in interest rates maintain the supportive trend of the US dollar that has been in place since 2021. It is worth noting that the markets have recently lowered their expectations for a rate cut in 2023, which proves a “tough” development for the dollar in particular. Accordingly, the analyst added, “The Fed’s primary focus is on inflation, which we believe will take longer to shift enough to prompt the FOMC to do a bearish reassessment.”
Meanwhile, the Euro is expected to suffer amid signs of continuing deterioration in economic activity in the Eurozone. “Our gauge of speculative short positions in the euro has already rebounded significantly," Bunning says. This indicates center pressure rather than a drastic change in direction. Thus, the risk and reward support selling the EUR/USD pair.”
EUR/USD's recommendation targets: EUR/USD drops to 0.9560. The 2022 low is at 0.9535.
Forecast of the euro against the dollar today:
There is no change in my technical view towards the EUR/USD currency pair as the general trend is still bearish and will remain so until the markets react to the contents of the last meeting of the US Federal Reserve, inflation figures and US retail sales. Currently, the bears' closest targets to the trend are the support levels 0.9665 and 0.9550, respectively, which are sufficient to push the technical indicators towards oversold levels.
On the upside and according to the performance on the daily chart below, the EUR/USD must move above the parity price to be a first chance to change the current downtrend.
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