EURUSD has managed to reclaim its parity with the US dollar after revisiting its twenty-year low at $0.99 on Monday. The bulls have pushed the price back to a reasonable exchange level, with the US dollar at $1.0032 witnessed during the Asian session today. The weakening of the dollar index seen in the market today has been the significant catalyst pushing the EURUSD to its current level above $1.
The bulls seem to be returning, as the market awaits the ECB monetary policy meeting accounts report to be delivered today. This report is designed to provide a detailed statement of the ECB governing board’s previous discussions on the monetary policy to adopt during their last session. It further exposes the reasons that influenced the committee to hike the interest rate by 50 basis points during their previous session and their current stance on the interest rate.
An aggressive stance by the ECB in adopting monetary policy in September will result in a more bullish trend for EURUSD, whereas a dovish stance will discount EURUSD strength.
The ECB president, Christine Lagarde, has been reported as not likely to attend the Jackson Hole Symposium today, nor the Bank of England Governor (BoE), Andrew Bailey. This means the primary focus during this summit will be on Fed Chair Jerome Powell’s speech on Friday.
There are largely wild speculations amongst analysts that the Fed Chair might turn dovish in his speech tomorrow and consider the need to slow down on the aggressive interest rate hikes gradually. This will be a significant disadvantage for the US dollar if it turns out so, and would instead strengthen EURUSD.
While the chances are currently slim, it does not rule out the possibility, as there has been growing concern about the US entering a recession if the Fed continues to raise interest rates at the expense of economic growth.
Aside from the factors mentioned above, in the US zone, two other important factors will also influence the performance of EURUSD in the market today. These factors include tonight’s US prelim GDP q/q report and the jobless claims report.
The GDP report would display the overall economic progress recorded in the US economy in the just concluded quarter. This report will feature the changes in the value of all the goods and services produced by the country within the last quarter.
The outcome of this data will likely influence the Fed’s decision on whether to tighten its monetary policy further to slow down and focus on economic growth.
Higher readings from this report will strengthen the US dollar and weaken the EURUSD. The forecast for this data is -0.7%, while the previous record was -0.9%.
Moving further, the US jobless claims report, on its part, bears a similar influence to the NFP reports. Thus, an increase in jobless claims often causes a downward trend for the US dollar. This will trigger more recovery for the EURUSD. On the contrary, lowering US unemployment claims will strengthen the US dollar and cause the EURUSD to fall further.This means we can expect a retest of the previous low created on Monday for EURUSD should the report come out lower.
With these factors in mind, intense volatility is expected from EURUSD in the market today.
EURUSD forecast
The tone of the ECB committee members in the report from their previous meeting discussions to be presented today, as we have explained, will be the determinant force to move this pair in the market today.
A hawkish stance from the ECB board members will trigger a bullish trend for EURUSD, while a dovish stance will lead to selloffs for EURUSD.
Failure of EURUSD to hold above the parity level of 1 could trigger more downside for this pair, with the first support level located at $0.9902. A break below this level could trigger more downside with the following support at $0.9853.
On the contrary, should the price sustain above the parity level of $1 today due to positive readings from the reports today, we can expect more upside for this pair, with the first resistance at $1.0112. A break above this level could trigger more upside to the significant resistance at $1.02.
In all, it is essential to apply proper risk management as substantial volatility is expected from EURUSD in the market today.
