Markets live by the volatility of their participants' moods, and if they weren’t characterized by this trait, they would be boring straight lines with almost no volatility.
This time, the intrigue of the beginning of the year for EURUSD was the new statements of the Fed representatives, which can swing the pendulum of prices in the short term in the opposite direction from the emerging strategic mainstream of 2024, which is a gradual weakening of the US dollar.
Speculation over the central bank's plans intensified after Dallas Fed president Lorie Logan said last weekend that officials may have to slow the pace of balance sheet reduction amid signs of liquidity shortages in financial markets. Timing is critical for traders. An early end to balance sheet reduction means less Treasury supply to be absorbed by the private sector.
As the Federal Reserve says it plans to begin slowing the pace of its balance sheet reduction, it's important for market participants to determine how soon the end of quantitative tightening could begin.
Analysts at Bank of America Corp. and Barclays Plc forecast the central bank is likely to begin winding down the program in April, with the second round ending by mid-summer. Deutsche Bank AG expects the economic recovery to begin in June, while Morgan Stanley tells clients that the Fed wants to give markets enough time to prepare and won't act until September.
All these statements are likely to weaken EURUSD until the end of January, especially as seasonal factors confirm the strengthening of the US dollar in this period.
The final recommendation is to sell EURUSD.
The profit could be fixed at the level of technical resistance at 1.083. Loss — at the level of 1.113.
This content is for informational purposes only and is not intended to be investing advice.
