The euro-dollar pair is loitering in a 100-point price range of 0.9750–0.9850. The situation is a stalemate: buyers cannot approach the parity level, while sellers are unable to push the price to the area of 96–95 figures. In fact, traders are marking time, not daring to make a downward or upward breakthrough. Moreover, this situation has been observed for more than a week.
Take a look at the EUR/USD weekly chart: since the end of September, that is, for almost four weeks now, the pair has been unable to decide on the vector of its movement. Here we see a flat in a wider price range—0.9650-1.0000. However, this does not change the essence of the current situation, because for the development of the downward or upward movement, traders need to gain a foothold above or below the indicated levels.
In general, the dynamics of the pair is determined by the dynamics of the dollar index, which in turn reacts to the level of anti-risk sentiment in the markets. For example, yesterday, the greenback strengthened its positions throughout the market amid the worsening political crisis in the UK. The scandal provoked by the resonant "anti-crisis plan" (which assumed tax cuts by closing holes in the budget with borrowed funds) was not without political consequences.
Even though Prime Minister Liz Truss hastily dismissed the finance minister, and his successor actually canceled the tax reform, the hype around the head of government has not subsided. The Conservatives rebelled against their leader and demanded that she leave her post. The current situation was eloquently illustrated by British bookmakers—the probability of the prime minister's resignation by the end of this year is estimated at 80%. If the situation does not magically stabilize in some way, the UK may face new elections of the leader of the Conservative Party (who will lead the government) or re-elections of parliament, in which the Conservatives are likely to lose their majority.
In other words, Truss was unable to put out the fire—not only the Labor and party members, but also some members of her government turned against her.
Against the backdrop of strengthening anti-risk sentiment, the safe dollar was in high demand. In addition, greenback was also supported by real estate data. The volume of issued building permits in the US increased in September by 1.4% after a serious decline in August (-8.5%). Also, dollar bulls reacted to the rhetoric of the Fed representatives, who voiced very hawkish comments. Charles Evans, Neel Kashkari and James Bullard said that the regulator will continue to take steps to curb inflation. However, their rhetoric was not specific, so the reaction of traders was limited.
Today, the interest in risk has slightly increased, so the dollar was under slight pressure. Market participants reacted to Bloomberg's information that China is considering reducing the quarantine period for incoming visitors from 10 to 7 days. This information came amid rumors that the PRC may weaken the policy of "zero tolerance" to COVID.
But in general, the situation for the EUR/USD pair remains in limbo. Both buyers and sellers need a powerful information impulse that will allow them to leave the above price range. In this context, buyers can theoretically be helped by representatives of the Fed, who will comment on the current situation tonight. We learn the position of Philip Jefferson, Lisa Cook, Michelle Bowman and Patrick Harker. If they tighten their rhetoric in the context of the December and subsequent meetings (for example, by allowing a "series" of 75-point increases) or at least hypothetically allow the option of a 100-point increase, then dollar bulls will gain a second wind, increasing pressure on EUR/USD.
Also today, it is worth paying attention to the publication of the manufacturing index of the Fed-Philadelphia (positive dynamics is expected) and the indicator of home sales in the secondary market in the US (here, on the contrary, a further decline is predicted).
From a technical point of view, the situation is also uncertain. On the EUR/USD daily chart, the price is on the middle line of the Bollinger Bands indicator, between the Tenkan-sen and Kijun-sen lines. On the four-hour chart, the price is between the middle and lower lines of the Bollinger Bands, but in the Kumo cloud.
In other words, neither the technique nor the foundation signals a clear advantage of the upward or downward scenario. In my opinion, in the coming weeks, the downward dynamics will resume, but at the moment, it is impossible to talk about the priority of short or long positions. Given the current uncertainty, today it is advisable to take a wait-and-see attitude for the EUR/USD pair.