The beginning of this week is expected to be calm in the markets, mainly because the stock market on Wall Street will be closed today due to the “Labour Day” holiday.
In recent sessions, the euro has been depreciating against the US dollar, following a long rally that intensified after the technical structure was breached. However, this week, volatility is likely to return to the markets, as several important data points on both the US and European economies are set to be released. Employment data in the US and economic activity in both Europe and the US will be in focus.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app
EUR/USD Daily Time Frame chart. Source: xStation 5
Technical Analysis
If we look at the behaviour of the EUR/USD, we can see that the reaction is not entirely unexpected, as the price had been showing signs of being overbought for quite some time and typically tends to correct near relative highs.
Nevertheless, the bullish scenario remains intact, at least as long as the price continues to trade above the technical structure that was previously broken.
The markets are factoring in interest rate cuts from both the ECB and the Fed; however, expectations that the Fed might accelerate the pace of cuts have been supporting the rise in the EUR/USD. If this week's data again indicates that the US economy urgently needs stimulation to avoid the worst-case scenario, then the EUR/USD pair could regain new momentum.
USD index, Weekly time frame chart. Source: xStation 5
Similarly, in the US dollar index, there are clear signs that the downward trend could extend in the long term. Although it is rebound in the short term, this behaviour is a result of testing the support zone that was tested last week.
Henrique Tomé,
Analyst Portugal
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
