■ Market: Foreign Exchange | EURUSD

■ Forecast: The US Dollar looks currently stronger, EURUSD to rebound in November

Since July 2023, the EURUSD has been moving lower. However, the pair is currently short-term oversold. The market is mainly influenced by inflation data and expectations for upcoming interest rate decisions. At present, US macroeconomic data are stronger, which supports a weaker euro against the US dollar. This downtrend is expected to continue until November 2023.

Regarding interest rates, investors do not expect further hikes on either side of the Atlantic. Still, a final rate increase in the US cannot be completely ruled out.

What happens to Interest Rates

□ The ECB has raised the euro interest rate to 4%, the highest level since the euro was introduced. However, Christine Lagarde stated that the current key rates are sufficient to bring inflation back to the long-term target. Investors interpreted this as “no more rate hikes,” causing the EURUSD to fall.

□ Across the Atlantic, the FED recently raised interest rates to 5.5%, the highest level in 22 years. According to the FedWatch Tool, the market expects no further hikes in 2023, with a likely rate cut starting in September 2024.

Read more: Forex Trading Signals: EURUSD September-November 2023

Forex Trading Signals: EURUSD October-November 2020

■ Market: Foreign Exchange, EURUSD

■ Forecast: The euro is likely to stay strong against the US dollar until the American elections on November 3rd, after which the US dollar is expected to recover significantly against all major currencies.

2020 is a case-study year. After the global lockdown in March, everything changed. Central banks shifted their key monetary policies, inflation targets disappeared, employment collapsed, and real interest rates turned negative. On top of that, the global supply chain broke down, and the entire idea of economic globalization was seriously damaged. What a year for the Forex markets and the world. In this difficult environment, the FED and ECB are struggling to stimulate their economies and maintain employment and consumption. They are doing this by applying extremely flexible monetary policies and injecting record levels of liquidity into the system.

Read more: EURUSD Trading Signal October-November 2020

■ Market: Foreign Exchange

■ Trading Assets: EURUSD | DXY

In times of war and economic uncertainty, investors seek safety, and the US dollar becomes the undisputed leader. In 2022, the US dollar rose 12.75% against the euro, and the US Dollar Index (DXY) increased by 15.54%. Since June 2021, the DXY has gained 23.6%.

Starting with the US Dollar Index.

The US Dollar Index Historic Bull Runs (1968-2022)

The current 23.6% rise in the US Dollar Index is one of the strongest movements in the past 54 years, though not the strongest. Below are the major US Dollar Index bull runs since 1967:

• July 1973 - January 1974, +20.9%
• March 1975 – May 1976, +15.9%
• September 1980 – August 1981, +34.4%
• December 1981 – November 1982, +21.4%
• January 1983 – January 1984, +17.6%
• March 1984 – February 1985, +30.2%
• December 1987 – June 1989, +24.6%
• February 1991 – July 1991, +20.5%
• September 1992 – December 1993, +23.5%
• August 1995 – April 1997, +20%
• October 1998 – July 1999, +14.5%
• October 1999 – October 2000, +22.1%
• January 2005 – November 2005, +14.8%
• July 2008 – November 2008, +24.0%
• December 2009 – June 2010, +19.2%
• May 2014 – March 2015, +27%
• May 2016 – December 2016, +12.8%
• February 2018 – December 2018, +10.6%
• June 2021 – Today, +23.6%

Read more: Forex Trading Analysis: US Dollar Index & EURUSD in late 2022

USDX and EURUSD February-March 2018

In short, the Euro looks ready to surge as high as 1.34 in the coming months, but the ECB is working hard to stop it. Americans say, never trade against the Fed—let’s see if the same applies to the ECB.

■ Market: Foreign Exchange

■ Assets: EURUSD, USD-X

■ EURUSD Today: 1.2350

■ Basic Forecast: EURUSD to range between 1.19-1.26 for several weeks, and then it will move considerably higher, targeting 1.34

■ Trade Signals:

(i) Long Positions if EURUSD retraces to 1.1900, or

(ii) Long positions if EURUSD manages to cross above 1.12600-1.2650 in the weekly chart

EURUSD OUTLOOK -EU and the US back in a Currency War

There are concerns within the European Central Bank that continued USD weakness could seriously hurt Europe’s economic growth. Meanwhile, the U.S. administration shows no intention of addressing rising inflation. For reference, U.S. GDP is expected to grow at an annualized rate of 4.5% in the first quarter of 2018.

In this context, a new currency war is emerging between the FED and the ECB. Here are the key moves from each side:

□ FED ACTIONS (Goal: Weaken the dollar to boost growth):

(i) Continuing with expansionary fiscal policy, financed through Treasury debt

(ii) Ignoring inflation concerns, despite a recent 2.9% annualized rise in average hourly earnings

(iii) Not addressing the growing U.S. trade deficit

(iv) Confident, with record GDP growth expected in Q1 2018

(v) Threatening more protectionism—The Trump administration imposed tariffs on solar panels in January 2018

□ ECB ACTIONS (Goal: Stop the Euro from rising):

(i) Expressing concerns over Euro volatility (January – Mario Draghi)

(ii) Tactical statements by ECB officials pushing back against USD weakness

(iii) Proposing a full banking union and deeper fiscal integration among EU members

(iv) Continuing money printing, with a long-term inflation target of 2.0%

Read more: Free Forex Trading Signals EURUSD February 2018