What direction can we expect on the price from the current market levels?

The Euro and the US Dollar are the two of the most well known currencies in the world. In fact, the EUR/USD is the currency pair with the largest global trading volume on a daily basis ($5 trillion), meaning it is the world’s most traded currency pair out there. It actually accounts for around 25% of the overall currency market’s daily trading volume. Thus, most traders and investors that participate on the currency exchange market usually use that instrument due to its high daily volatility and price movements.

We at Dow Experts enjoy analyzing different trading and investment opportunities that would give a chance for our followers to maximize their profitability on a daily, weekly and monthly basis.

Therefore, today’s analysis would be on the most well known currency pair where we would be looking at the past performance, as well as for potential future directions of the price that would give us a chance to make high profits trading the pair.

Fundamental analysis

We at Dow Experts believe that intelligent traders and investors should look for both fundamental and technical factors that have an impact on the different price movements every single day. In fact, the fundamental analysis analyzes all the outside factors that have an impact on the price, such as economic reports and events, political factors (such as the US presidential election results coming out lately), as well as companies announcing their quarterly financial statements or coming out with their new products. Actually, all those factors tend to have a big impact on the different price movements on all those instruments, such as currency pairs, commodities, indices, ETFs and stocks.

By looking at the fundamentals, we shall say that due to the coronavirus 2020 has been a very volatile year for the markets. In fact, we have seen a large volatility all across the board and of course the EUR/USD has been quite volatile ever since the virus started spreading around in early 2020. However, we should mention the fact that the coronavirus has been bad news for both the EUR and the USD and we shouldn’t think that only one of the currency was impacted during the coronavirus pandemic. We believe the fear caused by the virus has been bringing negativity across traders and they have been looking for other factors that would have an impact on the price rather than only the virus itself.

Actually, the Federal Reserve’s policy of lowering interest rates to zero has been the main reason for the dollar weakness since March this year. The EUR/USD was trading at $1.07 to reach the $1.20 mark in September. The main reason for that has been the fact that the FED President Powell has been saying that they would tolerate an above-target (2%) inflation – a move that is positive for the stock market and has been among the main reasons why stocks and indices have done so well lately, however, by creating inflation they have been weakening the dollar further. Due to the low interest rates in the US, the US Treasury yields have gone down to all-time lows as well. In fact, the 10-year treasury yield went negative in the end of August and the beginning of September this year. Thus, the negative expected return on the Treasury bonds makes the dollar less attractive to investors and that has been the main reason why we have seen such a huge dollar weakness since March this year. The FED has been clear that it would be sticking to its zero-interest rates policy for quite some time and that is expected to keep the dollar rather weak in the next few months.

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