The New Era for the Euro

The New Era for the Euro

2022-02-07 • Updated

European Union is one of the most economically stable regions in the world. Inflation is usually low, so are the bank rates. Some of the banks even charge fees for depositing the euro. But coronavirus changed the game. Now, the European central bank needs to act to support the rapidly changing economy. This article will analyze the possible scenarios for the EU, and what's more important, look at the charts. There is a lot to see, let's go!

ECB actions and market reaction

President Christine Lagarde's press conference fell quite clearly on the hawkish side on February 3. While there were no changes in the ECB's action, the comments during the press conference were interesting. As expected, all monetary policy instruments were left unchanged.

The ECB still expects a strong economic recovery and points to strong labor market developments over the coming months. At the same time, the risks to the economic outlook were still labeled as "broadly balanced," but the ECB stressed more downside factors than it has previously. Regarding the inflation assessment, the ECB spoke less about the expected inflation trajectory. Even more interestingly, the ECB reintroduced the phrase that "risks to the inflation outlook are tilted to the upside for the first time in years." This risk assessment had disappeared from the ECB's introductory statements when quantitative easing (QE) was started.

No one could have seriously expected the ECB to act today as there is simply nothing the ECB can do to bring down inflation immediately. But now, the market has a clearer view of the bank's plans. This year, Lagarde opened the door to a speeding up of asset purchase reductions and a rate hike. Considering all this and assuming that energy prices do not drive over the next four weeks, we expect the ECB to speed up the reduction of net asset purchases and bring them to an end in September. It will allow the ECB to hike the deposit rate at least once before the end of the year.

EUR vs. USD, JPY, and GBP

The support at 1.1180 got cleared, and bullish divergence on the RSI has formed. From now on, the euro looks strong against the dollar. We expect the pair to consolidate between 1.1300 and 1.1500 before the further surge.

EUR/USD daily chart

Resistance: 1.1500; 1.1680; 1.1900

Support: 1.1300; 1.1120

EURUSDDaily.png

We see the reaction to round 132.00 round number in EUR/JPY. A pullback to 200-daily MA should happen before any growth.

EUR/JPY daily chart

Resistance: 132.00; 133.30

Support: 130.50; 130.00; 128.40

EURJPYDaily.png

The same goes for EUR/GBP. Robust bullish momentum will slow down as the market decides the next movement. So a 0.8422 is a sweet zone for buy orders.

EUR/GBP JPY daily chart

Resistance: 0.8500; 0.8600

Support: 0.8422; 0.8380

  EURGBPDaily.png

To sum up, the euro skyrocketed a little bit too much and needs a minor correction. But overall, we expect EUR to rise in a matter of weeks.

LOG IN

Similar

Bulls Are Coming Back
Bulls Are Coming Back

The US dollar index rose to 105.40 after the Fed’s 75-basis-point key rate hike, while the stock and the crypto markets fell. However, during the past few days, investors and traders returned to risk assets as they expect inflation growth to slow. Moreover, Jerome Powell, the head of the Federal Reserve, announced the Fed might start cutting the key rate by 2024, which is the most evident hint of an upcoming market reversal.

What to Trade on June 20-24?
What to Trade on June 20-24?

Last week was shocking!  The US dollar gained more than 2% against other currencies ahead of the 75-basis points rate hike by the Federal Reserve on Wednesday but dropped after the announcement…

What to Trade on June 13-17?
What to Trade on June 13-17?

Last week was intense!  The US dollar gained more than 2% against other currencies on investors' concerns regarding one more inflation wave in the United States caused by the fuel crisis…

Latest news

What to Trade on July 4-8
What to Trade on July 4-8

Last week was bearish for risky assets such as stocks, oil, gas, and crypto. Will the upcoming week change the situation across the markets? Let’s look at it in detail!

When Will the US Stocks Bear Market Bottom?
When Will the US Stocks Bear Market Bottom?

US stocks have delivered their worst first half of a year in more than 50 years triggered by the Fed's attempt to control inflation and growing concerns about recession.

The Dollar's Strength or Other Currencies' Weakness?
The Dollar's Strength or Other Currencies' Weakness?

The value of the US dollar continues to rise, but is this because of the strength of the dollar itself or just the weakness of the euro, Japanese yen, and British pound? Since the beginning of the year, the US dollar index has been up 8…

Deposit with your local payment systems

Be on top of your game

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera