FX.co ★ EUR/USD pair's new target is the level of 1.1500

The American and European currencies are trying to reverse the previous trend in the EUR/USD pair, which mainly showed a downward trend. The new target of this classic pair was the level of 1.1500, which can be achieved with massive strength.

For several days, the EUR/USD pair has been trying to break through the upper border, but the level of 1.1500 was mesmerizing. When the situation develops favorably and there is the confidence that the desired level is about to be reached, luck slips away. The pair returns to the starting point, disappointing the markets.

The situation is repeating itself. The EUR/USD pair is marking time, although there are plenty of chances to increase. Among them, experts include the "hawkish" actions of the ECB and the Fed. The pair's growth is hampered by the euro's confusion, which cannot decide on the direction.

The multi-directional dynamics of the euro are confusing the market. It showed a steady rise on Monday, which was replaced by a gradual decline. The upward trend of the single currency slowed down amid expectations of US inflation data. According to analysts, positive macro-statistical reports will provoke an increase in the US dollar's price. Currently, the bulls are defending the level of 1.1400, not letting the bears to the level of 1.1500. On this wave, the pair retains temporary growth potential. On Tuesday morning, the EUR/USD pair was trading at the level of 1.1423, which is a noticeable decline from the previous day.

There are not too many new reasons for the EUR/USD pair to grow soon. It may remain in the current range, waiting for a favorable moment. On a positive background, the pair can surge to the level of 1.1580, and then adjust again to 1.1400. If such a scenario is implemented, the EUR/USD pair will stabilize in the range of 1.1400 - 1.1600 by the end of February.

Positive reports on annual US inflation will be one of the catalysts for the growth of the US currency and, as a result, the classic pair. According to preliminary estimates, inflation accelerated to 7.3% in January compared to 7% in December. This is the highest level recorded since February 1982.

Information on US inflation is mainly important for the dynamics of the US currency since the Fed's further strategy depends on them. Summing up the results of the January meeting, the regulator drew attention to suitable conditions for an early increase in rates. This is due to the rapid growth of inflation and the strengthening of the labor market in the United States. The majority said that the decision to increase the rate will be made next month.

Currently, the euro looks restless, having difficulty choosing a further direction. The specialists believe that its short-term increase was not only due to changes in the ECB's policy but also due to the US dollar being overbought. The overvaluation of the USD played into the hands of the EUR. According to analysts' calculations, the fair exchange rate of the euro is 1.2200 based on the difference between two-year rates in the US and Germany. The revaluation in favor of the US dollar occurred amid a sharp increase in 2-year US government bonds.

Assessing the prospects of the European currency, experts believe that it will not stop when it reaches the level of 1.2200. Experts pay attention to the "overlap" effect recorded in its dynamics, due to which it can surge over 10 figures. The implementation of such a scenario in 2022 will lead the EUR/USD pair to the level of 1.3000.

Markets are focusing on US inflation and the results of the Fed's January meeting. According to Credit Agricole's analysts, another round of inflation or "hawkish" signals from the Fed is needed to resume the dollar rally in the near future and sharp rise in the EUR/USD pair. The current attempts of the dollar to beat the euro are quite successful, but they lead to distortions in the pair or slow down the dynamics of the EUR/USD pair.