The EUR/USD is closing in on the August bottom of 1.1664. According to experts at Société Générale, maintaining this level is critical for the recovery. The EUR/USD is nearing the level of 1.1660 that was established in August. Holding this can lead to a rebound; nevertheless, the multi-month moving average of around 1.1800 must be recaptured for the rebound to be sustained for a prolonged time frame. The next round of downside estimates is placed around 1.1610.
Outline Of The Technical Aspects
EUR/USD CHART Source: Tradingview.com
The euro/dollar has already fallen under 1.1680, with the pair trading at its lowest level since mid-August. The previous month’s bottom, which checks out at 1.1660, provides critical strength for the pair. On the four-hour chart, momentum is still to the negative, and the currency pair continues to trade underneath the 50, 100, and 200 Simple Moving Averages, respectively. Furthermore, recent efforts to rebound have been rebuffed, resulting in lower highs for the stock market.
Bears are in complete command of the situation. If the price falls under 1.1660, the next mark to monitor is 1.1610, followed by 1.15. Going upward, the barrier waits at 1.1725, supported by 1.1760 and 1.1790 – all of which served as a stumbling block to the EUR/USD’s recent recovery efforts.
Review of the Fundamentals
Traders have been moving their focus from one crisis to the other, swiftly moving away from Germany’s sluggish politics. Evergrande has been replaced by energy problems. It would take several months for an administration to be formed in Europe’s biggest economy, but fuel shortages are a major source of concern.
The most recent decline in the EUR/USD can be ascribed to rising US Treasury yields, which made the currency appear more appealing. Jerome Powell, the chairman of the Federal Reserve, is scheduled to speak later on today and clarify the bank’s message about an impending slowdown of its bond-buying program. Powell’s hawkish move has been calibrated and factored into markets, clearing the way for other trade movers to enter the picture.
The energy problem started with Spanish consumers grumbling about record-high power prices, and it has now extended to almost every other country. The scarcity of natural gas in Europe, which some believe is the result of a power play by Russia’s Gazprom, might jeopardize the continent’s rebound from the pandemic. China is also dealing with electrical shortages, which are in part due to a lack of coal supplies in the country. Claims of power failures in China, the world’s second-largest economy, have the potential to impede economic expansion and drive the safe-haven greenback up in value.
Additionally, the greenback may be in high demand as a result of the American-made concern. Senators from the Republican-controlled Senate have rejected measures that would have allowed the United States government to remain operational. That scenario has been seen before by investors — ‘politicians make a spectacle of themselves and then pull themselves on at the last minute’. Nevertheless, the Republican Party may be able to go even further this time, bolstered by the right propaganda and the Democratic Party’s huge expenditure plans. While rising prices are putting pressure on President Joe Biden, Republicans may argue that they are preventing reckless spending by blocking a $3.5 trillion budget resolution from being passed.