EURUSD downside potential is not yet exhausted

30 June 2023 178
EURUSD downside potential is not yet exhausted

The EURUSD currency pair, in accordance with the previous forecast, continued to decline. The price has overcome the level of 1.09 and is now heading towards the next downside target of 1.0825. Most likely, if the current fundamental background remains, the price will find support only at the level of 1.078. It is obvious that EURUSD strengthened excessively in June. Now market participants are gradually correcting the imbalance.


Yesterday's growth of the USD exchange rate accelerated after another strong data had been released. The Q1 GDP growth was revised up from 1.3% to 2% and jobless claims fell sharply to less than 240 000 after 3 weeks of increases. And that's not all of this week's data, which is helping the dollar strengthen.


Today's personal consumption expenditures index (PCE) numbers may support the positive dynamics of the American currency. According to the overall PCE, inflation is expected to accelerate from 4.4% to 4.6%, while according to the core index it is likely to remain at the same level of 4.7%. Market participants are still not taking into account those two Fed key rate hikes that Chairman Jerome Powell talked about. Confirmation of steady inflation could cause a significant reassessment of expectations and send EURUSD back to the lows of early June.


Meanwhile, in Europe, preliminary inflation data for the past month came out today. The rate of price growth slowed from 6.1% to 5.5%, while the core inflation rate rose slightly from 5.3% to 5.4%. There was no evident reaction of prices to this statistic: they have only slightly deviated from the forecasted values. For a more significant change of EURUSD quotes it is worth waiting for updated PCE figures.


Having reached the Fibonacci 38.2% level (1.087), EURUSD immediately tried to reach the 50% level (1.0825). If successful, there will be a chance to get to the final target of the correction - the 61.8% Fibonacci level (1.078).


Consider the following trading strategy: 


Sell EURUSD in the range of 1.084-1.087. Take profit 1 – 1.0825. Take profit 2 – 1.078. Stop loss – 1.09.


Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion

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

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