Over the past week, EURUSD has significantly weakened and is currently trading near local lows of 1.13500. What triggered this? The Federal Reserve’s (Fed) hawkish tone and a stronger dollar.
The US regulator’s rhetoric remains the key factor shaping the pair’s dynamics. At its latest meeting, the central bank kept borrowing costs unchanged at 3.75%, but the market read “hawkish” between the lines and began pricing in a rate hike in the coming months. This shift underpinned the greenback and lifted American Treasury yields. EURUSD was not thrilled by this news, as the single currency keeps losing its appeal, while its US counterpart shines brighter.
The eurozone’s situation leaves much to be desired. The European Central Bank (ECB) has recently raised interest rates in a desperate attempt to tame stubborn inflation, which sits above the regulator’s target. At the same time, officials signaled that further tightening should be approached with caution, given the region’s anemic performance. This effectively deprives the euro of support. As a result, the ECB finds itself in a predicament: on the one hand, elevated consumer prices beg for higher rates; on the other, monetary tightening could put additional pressure on an already fragile economy.
In general, the EURUSD fundamental picture looks bearish. The yield advantage stays firmly on the dollar’s side. Moreover, US GDP continues to show greater resilience than Europe’s.
The ultimate recommendation is to sell EURUSD at the current price, targeting 1.12000 within a month. For better risk management, place a Stop Loss order above the resistance level, at 1.15000.
This content is for informational purposes only and is not intended to be investing advice.
