- The dollar is making new highs in anticipation of the Fed’s rate hike.
- EUR/USD has fallen back below parity after some consolidation.
- ECB is open to limited economic growth to cool demand.
Today’s EUR/USD price analysis is bearish. On Tuesday, the dollar climbed nearly to a two-decade high as investors prepared for another aggressive interest rate hike from the Federal Reserve. Rate futures traders are pricing in an 83% possibility of a 75 basis-point rise and a 17% probability of a 100-bps tightening.
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The dollar index was recently up 0.5% at 110.10, slightly below a more than 20-year high of 110.79 earlier this month, and was on course for its fifth weekly gain in six. This rise has seen the EUR/USD falling back below parity.
According to ECB President Christine Lagarde, raising interest rates to a point where they limit economic growth may be necessary to curb excessive inflation and cool consumer demand.
Even though the ECB has been raising interest rates at their quickest rate ever, inflation is still on the rise, and longer-term expectations, a crucial area of attention for policymakers, are beginning to rise above the bank’s 2% target.
She pointed out that the eurozone was moving from a low inflation environment to an exceptionally high one and that consumers’ inflation expectations were rising. Both of these developments pose a risk to longer-term expectations.
EUR/USD key events today
Investors await the Federal Reserve’s interest rate decision, where markets expect a 75bps rate hike. This event is bound to cause a lot of volatility in the pair.
EUR/USD technical price analysis: Bears preparing to make new lows below parity
Looking at the 4-hour chart, we see the price trading well below the 30-SMA and the RSI below 50. After a period of consolidation around parity, bears have finally won the battle. The price had been caught above the 0.9950 support level for some time, with buyers pushing the price to parity each time it got to this support.
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The bears finally broke below the support level, showing a lot of momentum. The price has retested the 0.9901 support level and has paused. If this level holds, the price will push up to retest 0.9950. However, if bears maintain their strength, they will break below 0.9901 and make a new low.
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