The Euro has continued to weaken against the dollar over the past few weeks and now it is set to hit a new all-time low as it heads towards a major economic data release on August 4th. With Europe’s slowdown intensifying, markets across the globe are starting to sense the potential for a major currency war which could result in prices reaching upwards of $1.2800 per ounce. Will this price action gain or lose against the USD? Or perhaps it will be a combination of both. To better determine if the EUR/USD will gain or lose against the USD in this economic data release, let’s first take a look at the history of these currencies.
Since the start of the trading year, the EUR/USD had managed to hold its own against the US dollar, primarily due to the strong euro (that is, the stronger the euro is in relation to the dollar). However, as the European Central Bank began printing more Euros, the Euro began to weaken versus the dollar. This has been attributed to the rising demand for the Euro in particular among companies in European countries that have large debt burdens. Over the past few months, this trend has only intensified with the European Central Bank continually buys Euros to support its national banks. Now, it appears that this action is beginning to have an effect on the Euro and the rest of the world economy.
So what does this all mean for investors? If the EUR/USD holds its current position, then we are looking at a major change in the market price levels. This is the reason why it is critical to know where the market will head before making any trades. The market may head up or may head down. Either way, you must act before the prices hit new highs or lows. So how does the Euro fall below 1.2800 for the first time since the summer of 2021?
First of all, it is important to understand that there are several reasons why the Euro may set new highs or lows in the market. First of all, the Euro has been going up versus the dollar since the start of the year. This is because many European citizens have been purchasing Euros as a means of securing their financial futures. When the market starts to open in the United States, it usually begins at a lower price compared to the Euro. This is usually because traders expect the Euro to soon begin to lose ground against the dollar, which would result in the European market being forced open in the US due to oversupply.
However, the Euro did not begin to drop immediately after the opening bell in the US market. This is because Euro traders expected the Euro to continue to gain ground versus the dollar. As the day progressed, more traders became bullish on the Euro and began to pull out of the European market. The Euro quickly lost ground versus the dollar and experienced a sharp drop. When this happened, many institutional investors who had been putting their money into the Euro were stuck with it. Traders in the United States began buying dollars in order to obtain the Euro ahead of its loss versus the dollar.
As you can see from the graph above, there is a clear trend in the way the EUR/USD pair is trading. The European Union as a whole was suffering through one of the worst recessions in its history, and this is why institutional investors sold off their shares of the Eurozone in order to obtain the dollar. As this trend continued throughout the trading day, more traders began to enter the EUR/USD pair due to the fact that they believed that the EUR/USD pair will experience a large run during the day. After this, many inexperienced traders who had been trading the market manually began to use automated software programs such as Forex Megadroid to execute trades for them.
It is important for you to know that a lot of the traders who purchased the EUR/USD during the large sell off were unsuccessful. This caused a large number of new traders to enter the market. These new traders did not have the experience or the knowledge necessary in order to determine which trends to follow in order to obtain the best possible profits. Most traders who suffered losses got out because they did not know what they were doing. If you are a new trader and you decide to go into the market and start trading, make sure you understand exactly how these trends work.
One of the most common mistakes that traders make when they are trading in the stock market is that they try to predict which way a particular currency pair will move. You need to learn how to do proper technical analysis instead. This is not an easy task, but it can be very profitable if you know exactly what you are doing. When the Euro drops below 1.2800 for the first time since 2021, you need to make sure you get in before the rush of people gets on the move.