The exchange rate of the EUR/USD has not been making many moves recently. The trading was stable this past Monday and did not make any rate changes. However, its value has been at a record low since March, meaning a poor forecast for the currency pair. It had previously been at 1.128 at its high point this year, but it went all the way down to 1.064. So, 100 EUR to USD would come up to roughly $106. This signals a considerable loss for the euro. So, there has been speculation over further drops recently, according to both EUR USD technical analysis and fundamental analysis.
The pair had been declining for a while now, over a matter of weeks. The Fed’s decision to retain high-interest rates at 5.25% to 5.50% last week surely did not help the pair. They also left open the possibility of making another 25 bp hike. The issue is that the Fed differed from the European Central Bank in interest rate policy, affecting the EUR base rate. European decision-makers were even more hawkish, going ahead with a hike already. They will now pause any more hikes, though. The difference between the two policies likely had a considerable effect on the currency pair.
Inflation Concerns and the EUR Base Rate
The hawkishness is likely due to signs of inflation rearing their head soon. Rising commodity prices are likely to have a huge effect. Considering this, it is not unlikely that we will see the exchange rate dip soon.
As for EUR USD technical analysis, there are a few signs of the future. There has been a considerable price drop, yet the pair remains above the trendline. The rate has also been below the 50-day moving average and below the resistance points. Meanwhile, the RSI has gone below 50, which further indicates towards a negative trajectory. Considering all of this, traders are expecting the pair to keep dropping until it hits around 1.06. We will have to see where it goes from there.
