EUR/USD: the equilibrium exchange rate while waiting for the Fed

EUR/USD dithers around near-term parity

In terms of technical analysis, nothing has really happened to the exchange rate since it broke through the parity threshold in mid-August. EUR/USD dithers around this threshold, inside its Bollinger bands and its long-term descending channel.

The bottom outlook remains technically bearish inside this channel and below the 200 session moving average. The short-term outlook will depend on the exit from the Bollinger bands. A breakout from below would set the stage for a continuation of the underlying downtrend, which is the preferred scenario, while a breakout from the top would set the stage for a bounce to the mid-August high at around $1.0350. This would be a first technical signal in favor of a long-term bullish reversal, but would be insufficient to bet on such a scenario.

Note that the majority of IG Client Sentiment is bullish (64%), which leans more in favor of a continuation of the downtrend.

Entrance: Sale below $0.99

Stop: $1.01

Goal: $0.96

Risk/return ratio: >1

Follow the evolution of the EUR/USD price with IG.


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