After ECB raised 0.75% of the interest rate last two weeks, this week is US Federal Reserve‘s turn to raise interest.
Last week US inflation rate came out as a surprise. While the market was expecting the inflation rate to reduce to 8.1% for August, the result turn out to be just barely reduced to 8.3% from 8.5% in July. That has caused the EURUSD to drop below parity again and just recover back to above parity last Friday.
The market consensus is still raising 0.75% of the interest rate this round although the higher-than-expected inflation rate has increased the possibility to raise 1% this round.
EURUSD Bullish Factors
- Nord Stream 1 pipeline gas flows to Europe resume. As of now, the Nord Stream 1 pipeline is still remained shut down. Any news of the resumption of gas flow will make EUR bullish.
EURUSD Bearish Factors
- US Federal Reserve raises more than the consensus of 0.75% on upcoming interest rate decisions.
- Any further delay on Nord Stream gas flow will also make EURUSD bearish. A delay in gas flow will cause high inflation in Europe. The current inflation rate in Europe is a lot higher than the US inflation rate and is hurting their economy. Furthermore, winter for Europe is coming. It is still unknown whether Europe will be able to survive this winter will minimal gas supply from Russia.
- The potential return of the European sovereign debt crisis is another factor to watch. The interest rate rise in the European zone will cause weaker European countries that have higher debt will need to repay their debt at a higher rate.
- More Hawkish comments from US Federal Reserve members.
- As per the last 2 market updates, Quantitative Tightening has accelerated from September onwards and the effect of QT should be doubled now.
We believe most likely EURUSD will continue to be bearish unless the interest raises is less than consensus.
Recommendation
With this outlook, and to be on the safe side, we strongly recommend all Ophiuchus and Limitless EA users to schedule to stop trading for this period starting from 20 Sep till 22 Sep. You can use the stop trading period feature in the EA to do that. You can also decide to extend the stop trading period (eg, till 24 Sep and only start trade on the week after next) if you would like.
Disclaimer – Please note that Limitless Trading is not liable for our recommendation and is not responsible for any loss or profit caused by this recommendation. You should assess your personal circumstances and perform your own research to make decisions for your trading.
