Article: The Strength of the US Dollar and the Weakness of the Euro
Upending EUR/USD exchange: unstoppable collapse persists
The global financial landscape is currently witnessing a significant shift, with the US dollar strengthening against the euro. This trend is influenced by a variety of factors, including technical support, political events, and monetary policies.
Technical Support and the EUR/USD Pair
There is strong technical support in the area of 0.9700 USD from the monthly chart, which could temporarily halt the sell-off. However, the EUR/USD pair has experienced short-lived rallies that have been consistently sold off, with lower highs and lower lows suggesting a well-established downtrend at a level of 0.974 USD. For the technical picture to improve further, the EUR/USD should rise above 1.048 and subsequently break above the trendline.
Political Pressure on the Euro
The upcoming Italian parliamentary election on Sunday is expected to put additional pressure on the euro, as a shift towards the right in Italian politics could bring instability to the Eurozone. This political uncertainty could further weaken the euro against the US dollar.
Monetary Policies and Interest Rates
The European Central Bank (ECB) is far behind the US Federal Reserve in its rate hiking cycle. The dollar index has reached a 20-year high due to three consecutive 75 basis point rate hikes and hawkish statements from Fed Chair Powell. In contrast, the ECB's interest rate currently stands at 1.25%, significantly lower than the Fed's 3.25%.
Economic Conditions in the Eurozone
The challenging economic conditions in the Eurozone are another factor contributing to the weakness of the euro. The energy crisis in the Eurozone is another headwind for the euro, as rising energy prices put a strain on the already struggling economies.
Outlook and Trading Strategies
Below 0.9700 USD, the next support level is at 0.9621 USD. Traders should refrain from entering long positions until there is a clear stabilization. Given the current trends, it is likely that the US dollar will continue to strengthen against the euro in the short term.
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This article provides an overview of the current state of the US dollar and the euro, highlighting the factors that are driving the strength of the US dollar and the weakness of the euro. It is important for investors and traders to stay informed about these developments to make informed decisions about their investments.
