Is the Euro Set to Recover Yet?

Is the Euro Set to Recover Yet?

2023-05-22 • Updated

Here's the scoop: The Bank of England (BOE) is set to accelerate the pace at which it shrinks its balance sheet, according to one of its deputy governors. Currently, the BOE is unwinding about £20 billion of quantitative easing every three months. The goal is to reduce the stock by around £80 billion per year through active sales and maturing assets. Despite concerns that this process, known as quantitative tightening, could destabilize markets, it has been smooth sailing so far. The BOE aims to strike a balance between reducing the balance sheet and maintaining market liquidity. Remember, though, quantitative tightening is not the primary tool for tackling inflation—interest rates take the lead on that front. Stay tuned to see how this plays out in the forex market!

EURUSD - H4 Timeframe

EURUSDH4-2105.png

Last week, during the PPI live market trading session in the telegram group, I mentioned that the US Dollar was gradually nearing a resistance level and could soon get weaker. This exactly played out and led to the price rejection from the pivot zone as seen in the chart above. However, I still uphold the overall bearish sentiment in the EURUSD market, and I have thus marked the likely supply zone price would react from. The highlighted supply zone has confluences from twin resistance trendlines, bearish moving averages array, as well as the 50-period moving average resistance.

Analyst’s Expectations: 

Direction: Bearish

Target: 1.07766

Invalidation: 1.08752

EURCAD - Daily Timeframe

 EURCADDaily-2105c.png

Whenever I see the moving averages arrayed in either an increasing or decreasing order as we have on the EURCAD chart above, I tend to simply look for trades in the direction of that order. Another notable confluence is the fact that price has made an initial reaction to the pivot zone just slightly below the 100-Day moving average. Based on these criteria, I would expect price to rise slightly higher, towards the 50-Day moving average, even higher.

Analyst’s Expectations: 

Direction: Bullish

Target: 1.47064

Invalidation: 1.45239

EURJPY - H4 Timeframe

 EURJPYH4-2105.png

When I noticed that the 50-period moving average had crossed below the 100-period moving average on the EURJPY chart, my initial deduction was that price might be preparing for a reversal. The candlestick pattern formed by the reaction from the highlighted supply zone gave me the confirmation I needed. The candlestick pattern indicates that the buyers may have been overpowered at that supply zone by a new influx of sellers. Hence, my sentiment on EURJPY would remain bearish unless by some unexpected market stroke, price rises above the supply zone.

Analyst’s Expectations: 

Direction: Bearish

Target: 147.402

Invalidation: 149.851

EURNZD - Daily Timeframe

EURNZDDaily-2105.png

If you’ve followed and digested my analysis up until this point, then you likely already guessed my sentiment on this one - Bullish! As you can see, the moving averages are arrayed in an increasing order which readily suggests a rising price action. Then, having a pivot zone that aligns perfectly with the 100-Day moving average and a support trendline adds the final piece of the puzzle. My initial target on this EURNZD trade is the 50-Day moving average.

Analyst’s Expectations: 

Direction: Bullish

Target: 1.74317

Invalidation: 1.71437

CONCLUSION

The trading of CFDs comes at a risk. Thus, to succeed, you have to manage risks properly. To avoid costly mistakes while you look to trade these opportunities, be sure to do your due diligence and manage your risk appropriately.

TRY TRADING NOW

You can access more of such trade ideas and prompt market updates on the telegram channel.

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