Market turbulence, Euro rising

I know, this is becoming an unnecessary sentence, but for a week. Since the outbreak of COVID, foreign exchange volatility has rebounded to unprecedented levels, which has brought a lot of opportunities. This week we saw many sharp fluctuations, and the pound's swing dart action is clearly the winner of the shock factor. However, when talking to traders before the weekend, it seems that the more meaningful measure to attract their attention is the rebound of the euro. This week, the single currency achieved widespread gains and is starting to look like there may be a more comprehensive rise in the short term. Especially against the US dollar, we have seen an increase of over 3% this week, leading to a stable rebound in prices from this year's lows. So, let's take a look at what caused this move, and as always, if you catch it? Well done! If I miss it? There will always be next week.

What caused this movement?

The fluctuation of the pound is beneficial for the euro

Part of the reason for the euro's rise this week is due to the weakness we have seen among its major trading partners. The US dollar and pound both fell significantly, providing ample room for the euro to rebound. The UK government's small budget seems to have fallen like a lead balloon, causing the pound to fall to its lowest level since the 1980s. Due to traders hoping to avoid a collapse of the UK economy, many are now predicting a significant shift in market pricing in the coming months, with funds shifting towards the euro this week.

Hawkish predictions from the European Central Bank

However, this story is not just a by-product of actions taken elsewhere. The euro also benefits from a more hawkish outlook for the European Central Bank. Goldman Sachs raised its forecast for the European Central Bank this week and currently expects further interest rate hikes of 0.75% in the coming months as the European Central Bank is working to curb soaring inflation. As the market adapts to the sharp changes in EU interest rates this year, the European Central Bank has reversed the negative interest rates implemented in response to the global financial crisis, and traders are digesting the changes in the outlook.

technical viewpoint

EURUSD

The euro rebounded from the low point of the bear market channel and rose sharply against the US dollar. The price has exceeded two key levels and is now rapidly approaching a retest to break through the 0.9885 level. This is the main level of the euro against the US dollar, with the top of the bear channel slightly higher than above. The breakthrough here will be a firm bullish stance, with a long-term focus on moving upwards to the 1.0364 level thereafter.