Stable decrease of EURUSD caused by the coming increase in borrowings

18 May 2023 233
Stable decrease of EURUSD caused by the coming increase in borrowings

The EURUSD currency pair is moving in a predicted direction. The U.S. government debt situation is beginning to get a little bit better. At least all the officials say that they will not allow a default to happen. On Wednesday, U.S. President Joe Biden and top Republican congressman Kevin McCarthy underlined their commitment to reach an agreement on raising the U.S. national debt ceiling in the near future.


Despite this, the dollar will continue to strengthen against all world currencies, in our opinion.

When the U.S. government debt is raised, the Treasury Department will start borrowing money in the debt market immediately. As a result, the yields on the country's government bonds will begin to rise, which will be an additional support for the growth of the dollar. When the borrowing wave in the market will pass, then there will be a process of weakening of the U.S. national currency. Also, the dollar will weaken because of the rate cut cycle in the end of 2023 and the beginning of 2024. Thus, in the long term, there is a focus on the weakening of the dollar. However, in the short term, the dollar will continue to rise.


The news about further interest rate hikes in the U.S. continues to come to the market. Such news is a growth driver for the dollar.

The head of the Federal Reserve Bank of Cleveland, Loretta Mester, one of the most ardent supporters of hawkish rhetoric, predicts that interest rates will continue to rise. However, majority of politicians underlined the need to estimate the consequences of tightening monetary policy. In the last meeting of the U.S. Fed, the rate was raised by 0.25% to 5-5.25%.

Recent speeches by officials indicate an ongoing debate over central bank policy in June. New York Fed President John Williams is taking a wait approach. According to him, the results of the regulator's actions take time to be seen and evaluated.


According to the technical analysis, the EURUSD currency pair continues its downtrend. Earlier targets have not yet been reached, so it is reasonable to continue opening short positions. The downside target for the currency pair is at the level of the previous price resistance 1.075. Stop-loss can be set at the break up of the resistance level of 1.086.


The EURUSD currency pair decline:

Take profit – 1.075

Stop-loss – 1.086

This content is for informational purposes only and is not intended to be investing advice.

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