The EURUSD currency pair is approaching the most important events of this week, keeping close to the 1.085 level. Since the start of April, the quotes have shown a decent rebound, but it is getting more and more difficult to continue the upward movement. Yesterday's trading session was quite indicative, the price ended at the same level where it started, and the whole day's growth was lost. The wave of euro strengthening against the dollar may turn in the opposite direction at any moment.
Ahead of today's US inflation report and tomorrow's ECB meeting, currency market participants once again raised the topic of possible parity between US and European currencies. Moritz Kraemer, Chief Economist at LBBW, expects EURUSD to move towards 1.01 by the end of 2024. He considers this scenario quite likely in case of rapid interest rate cuts in Europe with the Fed's more cautious actions.
Samuel Ziff, Head of Currency Strategy at JP Morgan Private Bank, also predicts a decline in the euro against the dollar. According to his calculations, every 0.25% difference in rates between the Fed and the ECB will result in a 1% drop in EURUSD. A new round of growth in oil prices worsens the outlook for the European economy, which is critically dependent on energy imports. Under such conditions, the euro has almost no potential to rise further.
According to Bloomberg, 60% of traders now expect EURUSD to decline. Although the parity level is not the most popular target (only 15% of investors predict it on a 12-month horizon), market participants are looking more closely at 1.07 and 1.05. If today's US inflation figures are once again worse than expected, the euro to dollar ratio will actively target these levels.
The Stochastic indicator on the daily chart gives a signal to sell, confirming the high probability of price decline. The bears' main short-term target will be a return to last week's lows near the 1.075 level.
Consider the following trading strategy:
Sell EURUSD at the current price. Take profit – 1.075. 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.
