Scenario Euro\Dollar up to 1.1800 – 1.2000
⇒ Warning. Any strategy does not guarantee profit on every trade. Strategy is an algorithm of actions. Any algorithm is a systematic work. Success in trading is to adhere to systematic work.
The Iron Scenario: Euro/Dollar for Long! 25.04.2024
Analyzing recent developments in the financial markets, especially in light of Jerome Powell’s speech at Jackson Hole, several key factors significantly impact the current state of currency pairs, particularly EUR/USD. Powell confirmed that the Federal Reserve (Fed) is on the verge of lowering interest rates, which has caused significant fluctuations in bond markets and exerted pressure on the US dollar. However, this rate cut has already been priced into assets, and the market seems to be preparing for further developments.
Many Forex traders are betting on the continued rise of the EUR/USD pair, anticipating dollar weakness amid upcoming rate cuts. However, it is crucial to consider that the Eurozone economy faces serious challenges, including stagnation in Germany and deflationary risks in China. These factors could limit further euro strength despite dollar weakness. It is important to monitor further Fed statements and economic data from the US and Europe to adjust strategies accordingly.
Monetary policy from the Fed will remain a key market driver in the coming months. If the Fed moves towards a slower rate-cutting pace than expected, the dollar could regain strength, putting pressure on the euro. Meanwhile, if US employment data shows further slowing, it will strengthen the case for more aggressive rate cuts, leading to continued growth in EUR/USD.
At this stage, it is crucial to apply flexible risk management strategies. The market may unexpectedly reverse, and it is important to be prepared for such a situation. The EUR/USD pair may maintain its upward momentum in the short term, but growth will likely be limited by the Eurozone’s economic problems and possible adjustments to Fed rate expectations.
Continuing the analysis, it is worth noting that the current situation in currency pairs, especially EUR/USD, depends on numerous factors that must be considered when making trading decisions. The Fed’s stance on rate cuts creates expectations of dollar weakening, fueling demand for the euro among traders. However, it is essential to remember that the economic situation in the Eurozone remains unstable, which could adjust the euro’s further strengthening.
The Eurozone faces challenges related to slowing growth and ongoing deflation risks. Germany, the region’s largest economy, shows signs of stagnation, negatively impacting the overall economic outlook. Additionally, weak demand in China, a crucial trading partner for the Eurozone, adds further pressure on the euro. In a situation where the US economy remains relatively strong, even with expected rate cuts, the dollar could regain strength if economic data from Europe disappoints.
Current market expectations reflect a possible further rate cut by the Fed, creating the risk that the market may “overheat” its expectations and overestimate the extent of dollar weakening. It is important to monitor how economic indicators develop and how the Fed reacts to new data. Particular attention should be paid to speeches by Fed representatives, who can shift current market sentiment.
For traders, it is essential to remain flexible and ready for any market turns. Risk management-based strategies are especially relevant in conditions of high uncertainty. In the short term, the EUR/USD pair may continue to rise, but further dynamics will depend on the Eurozone’s ability to tackle internal economic problems and how strongly the Fed adjusts its monetary policy.
Thus, the forecast for EUR/USD in the near term remains optimistic but with a high degree of caution. A strategy aimed at capitalizing on the current trend should include regular position adjustments based on new data and statements from key market players.
Forecast for EUR/USD Reaching 1.20
To achieve the EUR/USD rate of 1.20, several key factors that will influence this currency pair in the coming months must be analyzed.
- Monetary Policy
The Federal Reserve and the European Central Bank (ECB) play a crucial role in EUR/USD movements. The Fed is expected to continue its monetary easing cycle in 2024, putting pressure on the dollar. Meanwhile, if the ECB sticks to a tight monetary policy, the euro could gain additional momentum. Fed easing may increase liquidity and risk appetite, which, in turn, will weaken the dollar and push EUR/USD higher.
- Economic Data
US and Eurozone economic indicators remain key indicators. A slowdown in US economic growth or a decrease in inflation could boost expectations of aggressive Fed rate cuts, supporting the euro. On the other hand, if the economic situation in the Eurozone begins to stabilize, it will also support the euro. Signs of recovery in Germany and other Eurozone countries will contribute to EUR/USD growth.
- Geopolitics
Geopolitical risks can play an important role in currency movements. Increased tensions in the Middle East or Eastern Europe could trigger demand for safe-haven assets like the dollar. However, in the event of a stabilization of the political situation, the euro may strengthen.
- US Labor Market
Weakness in the US labor market could accelerate Fed rate cuts, contributing to further dollar weakening and euro strengthening.
Conclusion
If the listed factors develop favorably for the euro, the 1.20 level for EUR/USD could be reached within the next 6-12 months. It is important to monitor inflation dynamics, economic data, and key central bank decisions.
BT
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