The EUR/USD had originally shown signs of continuing yesterday’s upward trend, however, the price has come under immense pressure over the last 3 hours. The price when looking at the daily performance of the pair shows a decline of 0.24% but the decline over the past 3 hours measures 0.35%.
The exchange rate has been strongly influenced by the comments made by the Central Bank as well as economic releases in the US made over the last 24 hours. The US Dollar Index has increased in value to form a bullish candlestick while the Euro index shows a significant decline.
Since the 16th of June, the price of the EUR/USD has struggled to maintain bullish momentum and has repeatedly found resistance at the 1.0603 level. The decline over the past few hours has pushed the price away from the resistance level but has not yet crossed onto a lower low, this is something that traders will be monitoring.
Prices were originally supported by the market expecting interest rates to rise but instantly changed direction after the Central Bank’s speech. This morning, the President of the regulator, Ms Lagarde announced the possibility of correcting the value by 25 basis points during the July meeting. In addition to this, she also gave indications of a further rate increase planned for September this year.
In addition to the above, there has also been plenty of criticism aimed toward the European Central Bank as they “continue to misunderstand the dangers of consumer inflation”. The Federal Reserve made a similar mistake but has since acted much quicker. For a long time, the level of inflation was believed to be a temporary issue driven by the recovery of the economy after the pandemic. Now the US regulator is forced to raise the rate at a record pace, which only increases the likelihood of economic stagnation or even possibly a recession.
The decline was also triggered by the central bank advising that they have revised the economic growth projections for the next two years. According to the central bank, the level of growth is likely to be much less. Also dampening the Euro is the European high debt level which can also be an issue if the ECB is unable to significantly increase interest rates.
The market is also awaiting the release of the US’s Consumer Confidence which is known to have a strong effect on the US’s exchange rates. This is due to be released within the hour.
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