EUR/USD: In-Depth Analysis and Forecast of the Euro Exchange Rate Amid Global Volatility

The EUR/USD currency pair represents the clash between the two largest economies in the world - the European Union and the United States. This is not only the most actively traded exchange rate on the forex market but also accounts for nearly $28 billion in daily trading volume, equivalent to over 50% of the total Forex market volume.

Basic Concepts of EUR/USD Exchange Rate

The EUR/USD exchange rate indicates how many US dollars are needed to exchange for one Euro. For example, if the current rate is 1.15, it means 1 EUR = 1.15 USD. This is the forward exchange rate between the common currency of 27 European countries and the currency of the superpower, the United States.

Market participants’ interest in this pair stems from its extremely high liquidity and continuous price volatility 24/5. Small changes in monetary policy by the European Central Bank (ECB) or the US Federal Reserve (Fed) can impact this exchange rate.

Historical Volatility and Shaping Events of EUR/USD

Since the Euro’s inception in 1999, the EUR/USD pair has experienced significant fluctuations. In 2007, when the Fed cut interest rates by 50 basis points, the Euro surged. In 2008, near-zero interest rate cuts further pushed the Euro higher.

The Greek debt crisis in 2009-2010 was a turning point when a series of investors sold off Euros, causing the rate to decline sharply. In 2013, the Fed’s announcement to end its economic stimulus program continued to exert pressure on the Euro.

In 2016, when Donald Trump was elected president, the USD appreciated strongly, causing EUR/USD to decline. During 2020-2021, the massive support packages from the ECB to combat Covid-19 pushed the rate from 1.06 to 1.18, an increase of 1,200 basis points.

Key Factors Influencing Euro Exchange Rate Forecasts

European Side:

• ECB interest rate policy - the higher the interest rate, the stronger the Euro
• Employment data and GDP growth of the bloc
• Public debt levels of member countries
• Political stability and geopolitical events
• Trade balance and tariff policies

US Side:

• Fed interest rate decisions - the most decisive factor
• Monthly inflation and unemployment data
• Quarterly economic growth
• Political events at the White House
• Budget deficit and national debt levels

When US interest rates are higher than Europe’s, the USD is more favored, causing EUR/USD to decline. Conversely, when the ECB raises interest rates while the Fed maintains low levels, the Euro will be bought.

Recent Trends in Euro Exchange Rate Forecasts

2020-2021 Recovery and Growth Phase

Following news of the ECB’s stimulus package in March 2020, EUR/USD entered a prolonged upward cycle. The rate increased from 1.06 to 1.18, an impressive rise. Despite concerns about Europe’s economic recovery due to dependence on tourism, ECB support measures helped restore market sentiment.

2022-2023 Geopolitical Uncertainty Phase

The Ukraine conflict became the main influencing factor. Energy prices soared, exerting significant inflationary pressure in Europe compared to the US. China’s Zero-Covid policy crippled the economy of Europe’s largest trading partner.

Europe was more heavily affected due to dependence on energy from Russia. The ECB was forced to raise interest rates, but at a slower pace than the Fed. As a result, EUR/USD declined sharply. In September 2022, the rate dropped to only 1.02, a 20-year low.

Detailed Forecast for the Months:

• June 2022: Expectation 1.069 USD/EUR
• July 2022: Forecast 1.037 USD/EUR (decrease 3%)
• August 2022: Forecast 1.023 USD/EUR (decrease 1.4%)
• September 2022: Forecast 1.022 USD/EUR (decrease 0.1%)
• October 2022: Forecast 1.009 USD/EUR (decrease 1.3%)

Effective EUR/USD Trading Strategies

Economic Event Analysis Methods:

First is an active strategy - traders position themselves about 20 minutes before a significant data release, predicting whether the price will rise or fall. This method is risky but can yield enormous profits if the prediction is correct.

Second is a reactive strategy - only act after the data is released, comparing it with market expectations. This approach is safer as it does not require prior prediction.

Third is a combination of both - having some hedging while being ready to adjust when actual data differs.

Technical Analysis Methods:

Use indicators such as Parabolic SAR, MACD, Bollinger Bands to identify entry/exit points. This method requires experience and skill to filter out false signals.

Ideal Trading Times:

EUR/USD trades continuously 24 hours, but the best times are from 20:00-23:00 Vietnam time, when both European and US markets are active. During this period, volatility can reach up to 25 points.

Thursday is the most active day (90 points), followed by Wednesday and Friday (78 points). Monday is usually the quietest due to fewer major data releases.

Notes When Trading EUR/USD

This currency pair has the highest liquidity but also significant volatility. Traders need to plan risk management carefully, setting take-profit and stop-loss levels before entering the market.

Avoid trading based on emotions or rumors. Always pay attention to the economic data release schedule of the ECB and Fed to avoid unexpected fluctuations.

Besides EUR/USD, pairs like GBP/USD, USD/JPY, AUD/USD are also closely correlated, so monitor them for a more comprehensive market view.