With more hawkish comments from US Federal Reserve members, the EURUSD dropped below parity again this week. Next week on 8th September 2022, it is again ECB (European Central Bank) Interest Rate announcement and we should expect it will be a volatile week for EURUSD.
To make things more clear, we change our writing style to bullish factors and bearish factors for our market update. Hopefully, it will help all of you to understand the current EURUSD situation in a better way.
EURUSD Bullish Factors
- The consensus or forecast for the coming ECB interest rate is 1%, which is one of the highest consensuses for ECB interest rate in history. Last month ECB only hike 0.5%. The current consensus is double last month’s rate hike. The highest actual rate we see so far for the US Federal Interest rate is only 0.75%.
- Nord Stream gas flows to Europe resume. The delay of gas flow from Russia to Europe was delayed, which hurt Europe’s economy and caused higher inflation in Europe.
EURUSD Bearish Factors
- ECB Interest rate announcement is less than 1%. This will definitely make EURUSD drop further.
- Any delay on Nord Stream gas flow will also make EURUSD bearish. Delay of gas flow will cause high inflation in Europe. The current inflation rate in Europe is a lot higher than US inflation rate and is hurting their economic. 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 last market update, Quantitative Tightening has accelerated from September onwards and the effect of QT should be doubled now.
Although it looks like there are more reason for the EURUSD to be bearish, but each potential factor has different level of impact on the EURUSD and it is hard to assess how much of these factors has been priced in the currency.
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 7 Sep till 9 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 10 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.
