Wednesday, September 28

The euro loses 8.5% from its highs of the year against the dollar

EUR/USDcontinues to maintain weakness against the dollar despite the fact that, in the last month and for the minimum, the balance was favorable to the single currency against the greenback in its change in the Forex. Neither the macroeconomic data in Europe and the United States Nor, above all, have monetary policy decisions changed the course of the relationship between the two currencies in the market.

That difference in tapering has not been crucial, perhaps of course, both due to the more hawkish movement of the FED and the anticipation of up to three possible rate hikes in 2022 against the ECB that will maintain the financial oxygen in the purchase of bonds, after ending the program related to support against the pandemic in March. All this without a possible rate hike on the horizon. The increase in inflation is more aggressive in the United States, but in the Eurozone it is not far behind, although growth levels seem to present better expectations in the United States.

With this panorama, in which the dollar only seems to react to the sound that the yields of the North American Treasury bonds mark, the truth is that the experts opted because the movements in a range included / understood between 1.1350 and 1.1250 dollars will predominate in the coming days.

In its quotation graph we see that the EURUSD ratio barely marks changes in the last five sessions, which, as we say, are still dominated by laterality, with monthly advances that touch the percentage point, but with falls already of 3.3% quarterly and that reached 7.5% in the year.

EURUSD annual quote at its crossroads

All on account of a volatility that has been installed in the markets and that promises an end of the year, marked by the exponential growth of the omicron variant in infections that, in many cases, as is happening with the European and also the Spanish virulence, had not been registered even at the top of the pandemic. The VIX, for example, rose 7.4% in the last five days and advanced 11.6% in the previous month.

Although widespread vaccination, now with the administration of the third dose increases to a lesser extent, both the curve of hospital admissions and in the ICU, as well as deaths. Even so, its possible effect on the economy, with an eye on the Christmas contagions that will multiply and the possible progressive restrictions, maintain the tension in the markets.

The premium indicators of Investment Strategies show us in bearish mode and with a half-point cut, that the EURUSD ratio is barely reaches 1.5 points out of 10 possible. On the positive side, the medium-term business volume and long-term volatility stand out.

EURUSD Premium Investment Strategies Indicators

The rest, downtrend in the medium and long term, total moment, both slow and fast, that is negative and long-term business volume that is decreasing, without forgetting that the volatility in the medium term, in its amplitude range, is increasing.

From ING they highlight that the level of 1.13 dollars in the EURUSD ratio will stabilize until the New Year and they highlight that despite the ECB’s pronouncement and its behavioral differences with the FED, the European Central Bank will have difficulties to ignore the omicron effect, with confinements in some countries. And they consider this to be the trend with a bearish underlying narrative for the EURUSD in 2022.

They highlight that, in general, the dollar tends to underperform at Christmas, although the aggressiveness of the Federal Reserve and instability may offset the negative effect. About the euro, consider from ING, that you are less likely to benefit from a weak US currency in this period.

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