EURUSD has started the week on a bearish trend after creating a low at $1.0023, barely 20 pips away from $1. The bears had taken their fair share from this pair up until the present moment following a hawkish Fed minutes report presented last week. The Fed signalled the possibility for a more aggressive interest rate hike during their next session in September. The bulls are struggling to regain control, bringing the price back close to $1.0045. Still, the prospects of a hawkish Fed outlook during the forthcoming Jackson Hole Symposium this week had given the bears an upper hand to dismantle this effort. The fact that the interest rate for the US dollar remains above that of the euro, with an over 2% difference, gives the former a decisive advantage over the latter. The interest rate for the US dollar, sitting at 2.5%, makes it more attractive to investors than the euro, still trailing at 0.5%. Hence, all prospects of more interest rate hiking for the US dollar always attracted more investors, irrespective of whether the Euro rate will be raised too.
Nevertheless, analysts still see a possibility for a short-term recovery for EURUSD especially given the call for more hawkish expectations from the ECB made by Deutsche Bundesbank President Joachim Nagel. Here, Nagel mentioned that the ECB is expected to continue raising its interest rates amidst the fear of recession due to high energy costs. He believed that the inflation rate would likely stay uncomfortably high all through 2023 and therefore called for a more aggressive interest rate hike from the ECB during their next session.
The Jackson Hole Symposium for 2022 is already around the corner and set to commence on the 25th of August till the 27th. This discussion to be carried out on this event will bear so many effects on EURUSD and will likely determine the next major trend for the EURUSD, whether to continue with the current bearish trend or to switch to a bullish trend.
Should the Fed turn out more hawkish during this event, then the US dollar dominance will likely be sustained, which means we can expect more downside for the EURUSD.
On the contrary, a slowdown in the Fed's aggressive stance due to the gradual fall in the inflation rate; will shift the attention to euro instead. This means we can expect a recovery for EURUSD from the current support level.
Nevertheless, EURUSD has a chance of recovering temporarily from its current support level at $1.00303, given the expectations of a reduction in the US durable goods report to be delivered on Wednesday. Analysts also hope to improve the French, and German flash service manufacturing PMI reports being delivered tomorrow to give the Euro a firmer footing for recovery. Otherwise, we can expect a more bearish outlook for EURUSD for the rest of the week.
How will the Jackson Hole Symposium affect EURUSD?
The Jackson Hole Symposium is an essential economic gathering traditionally hosted by the Federal Reserve of Kansas since 1978. This event is held at Jackson Hole, Wyoming.
At this session, various countries' policymakers, academics, central banks officials, academics, and economists across the globe assemble to discuss pressing economic issues, effects, solutions, and way forward. This Symposium gives room for paper presentations, commentaries, and general discussion sessions among participants on factors influencing the global economy.
During the Jackson Hole Symposium, investors often watched out for tighter monetary policies from the various countries' policymakers, including the Fed, ECB, BOC, RBNZ, BOJ, etc.
This means that the symposium will impact not just EURUSD alone but will extend to other forex pairs in the market as various countries' policymakers will discuss their set monetary policies to control the rising inflation rate. This event will dwell on the theme “Reassessing Constraints on the Economy and Policy”.
The impact of the Jackson Hole Symposium on EURUSD will largely depend on the monetary policy that both parties involved (ECB and FED) apply as their new outlook toward the economy. During this session, a more hawkish stance from the Fed could send EURUSD to dust again.
On the contrary, should the ECB sound more hawkish than the Fed? During this event, we can anticipate a short-term recovery for EURUSD.
Forecast for EURUSD
EURUSD is currently at a critical level and has broken the support at $1.00314 earlier during the Asian session today. The bulls need to reclaim this level with a strong bounce back for the pair to turn bullish again. Failure to reclaim this support within the next four hours time frame might lead to a retest of the previous low in June at $0.9951.
On the contrary, a recapture of this support level at $1.00314 will give room for more recovery for EURUSD ahead of the forthcoming event on Wednesday. The significant resistance for this pair is seen at $1.0095.
Above all, the dollar index is currently facing strong resistance at 108.2. A break above this level will trigger more sell-off for EURUSD will be a total rejection, and further downside movement will further support the recovery for EURUSD.