EURUSD: LOOKING BACK WHAT HAPPENED THIS 2022

Forex

As the old popular saying would go, “Last year I failed—this year I learned; Next year, I am rising”, that is certainly the case for the FX market’s most traded currency pair. EURUSD went from the Euro absolutely pounding the dollar; to the dollar bringing the Euro to 1:1 price ratio all in 2 years. Knowing what happened on the previous years, what could we have done different to maximize trend trades? Well, let’s take a trip back to memory lane and revisit all the important events.

ECB hesitant to raise Rates

The steep downfall of Euro this 2022 was fueled by their reluctance to raise the already plummeting Euro against the dollar—as the FED has been increasingly weary in curbing down inflation, the ECB headed by Legarde stood in absolute confidence of for their bond purchasing program which would only end until Q3 of 2022—further widening the gap between the Dollar and the Euro. Their announcement which transpired last March 2022, fueled further weakness for the Euro with the bearish impulse only ending last September.

The FED goes all out on rates!

Who could ever forget the time where Fiscal Stimulus rained across the US? Well, those times will forever be cherished now! As the Fed goes to its next stage of Monetary tightening and continuous siphoning—to clear out all the pandemic money, they’ve started increasing interest rates—and not by just any sum; they are doing it big time. Which leads us to the next question, how much will they be raising next year?

Is it a one-sided game again?

The Fed intends to raise its rates to 5% to 5.25% from the current 4.5% level. Will this continue to breakdown the Euro? We believe not. EURUSD has certainly been a one-way market last year. Many credit it from the fact the it’s all because of the US—while that is definitely true, we’d like to think otherwise. The ECB has been openly eating punches from the Dollar through restraining to raise rates. However, going back to their Q3 plans, the ECB has already started unloading the big guns. With latest rate hike being 50 basis points high. From this alone, we could definitely see that a long overdue duel is bound to happen this 2023—so what does our team expect? We are locking in on a rising consolidation—as the market tries to recover Euro’s lost grounds—This will be supplemented by ECB’s aggressive tightening next year to catch up with their neighbors.

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