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Home ANALYSIS

EURUSD backs off from highs as Lagarde as growth forecast lower, inflation forecast higher

A.R Chowdhury by A.R Chowdhury
March 11, 2022
Reading Time: 7 mins read
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EURUSD backs off from highs as Lagarde as growth forecast lower, inflation forecast higher

EURUSD

EURUSD trades in the range

The focus is on the EURUSD as Lagarde presser continues. The ECB forecast lower growth in 2022 and much higher inflation.

The price action in the EURUSD has seen a move back lower after the market initially tested the old swing lows from January and February 2022. The February 2022 swing low came in at 1.1106 while the January 2022 swing low was at 1.11207. In March, the price has traded above and below those levels earlier in the month but moved away to the downside on March 3.

With the recent run up, the price today retested those old lows and found willing sellers on the first look.

On the downside, the 200 hour moving average was broken yesterday for the first time since February 23 (to the upside). The corrective lows today did see brief moves below that moving average but only by a few pips. The buyers were leaning against that level.

The 200 hour moving average will remain a key barometer for buyers and sellers on the downside. Move below with more momentum and I would expect the buyers to turn to sellers and give up on the upside at least in the short term.

For now, there is disappointment being shown in the rejection of the high resistance area. The prices below the 38.2% retracement of the move down from the February 10 high at 1.1068 is a more bearish tilt. However, with the press conference ongoing, there could be up and down  volatility 
Volatility

In terms of trading, volatility refers to the amount of change in the rate of an index or asset, such as forex, commodities, stocks, over a given time period. Trading volatility can be a means of describing an instrument’s fluctuation. For example, a highly volatile stock equates to large fluctuations in price, whereas a low volatile stock equates to tepid fluctuations in price. Overall, volatility is an important statistical indicator used by many parties, including financial traders, analysts, and brokers. Volatility can be an important determinant in developing trading systems, protocols, or regulations.In the retail space, traders can be successful in both low and high volatile environments, however the strategies employed are often different depending upon volatility. Is Volatility Good or Bad? In the forex space, lower levels of volatile across currency pairs offer less surprises, movements, and are suited to certain types of individuals such as position traders.By extension, high volatile pairs are attractive for many day traders. This is due to rapid and strong movements, which collectively offer the potential for higher profits.However, the risk associated with such volatile pairs are manifold. Of note, volatility with instruments or indices can and do change over time. There can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. For example, certain months in the summer are associated with low trading volatility.Too little volatility is just as problematic for markets as too much. Too much volatility can instill panic and create its own issues, such as liquidity constraints.A famous example of this are considered Black Swan events, which have historically roiled currency and equity markets.

In terms of trading, volatility refers to the amount of change in the rate of an index or asset, such as forex, commodities, stocks, over a given time period. Trading volatility can be a means of describing an instrument’s fluctuation. For example, a highly volatile stock equates to large fluctuations in price, whereas a low volatile stock equates to tepid fluctuations in price. Overall, volatility is an important statistical indicator used by many parties, including financial traders, analysts, and brokers. Volatility can be an important determinant in developing trading systems, protocols, or regulations.In the retail space, traders can be successful in both low and high volatile environments, however the strategies employed are often different depending upon volatility. Is Volatility Good or Bad? In the forex space, lower levels of volatile across currency pairs offer less surprises, movements, and are suited to certain types of individuals such as position traders.By extension, high volatile pairs are attractive for many day traders. This is due to rapid and strong movements, which collectively offer the potential for higher profits.However, the risk associated with such volatile pairs are manifold. Of note, volatility with instruments or indices can and do change over time. There can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. For example, certain months in the summer are associated with low trading volatility.Too little volatility is just as problematic for markets as too much. Too much volatility can instill panic and create its own issues, such as liquidity constraints.A famous example of this are considered Black Swan events, which have historically roiled currency and equity markets.
Read this Term
.

There is still some good and bad in the technicals, but the price action today respected support and also respected resistance. The battle rages as traders await the next shove.

Looking at the  EURGBP 
EUR/GBP

The EUR/GBP is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the British pound of the United Kingdom (symbol £, code GBP). The pair’s rate indicates how many British pounds are needed in order to purchase one euro. For example, when the EUR/GBP is trading at 0.7500, it means 1 euro is equivalent to 0.75 British pounds.  The euro is the world’s second most traded currency, whilst the British Pound (GBP) is the world’s third most traded currency, resulting in a comparatively liquid trading pair. While the spreads of currency pairs vary from broker to broker, the EUR/GBP often stays within the 1 pip to 3 pip spread range.This may make it seem like a decent candidate for scalping, although its low range can be a hindering factor, similar to the EUR/CHF. What Makes the EUR/GBP Unique?As mentioned, EUR/GBP is seen as a viable pair for scalping, due to its relatively predictable price action, and low stable spread. Intraday trading the EUR/GBP however does generally require more patience compared to other pairs.From a technical standpoint, it follows that as EUR/USD and GBP/USD are positively correlated, EUR/GBP’s volatility is going to be less than the two aforementioned majors’. Perhaps more so than any other, this currency pair has been continually affected by ongoing Brexit discussions in the UK. Presently, there is no consensus on how the situation will be resolved, something that has influenced the EUR/GBP and will do so until a resolution is agreed upon.

The EUR/GBP is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR), and the British pound of the United Kingdom (symbol £, code GBP). The pair’s rate indicates how many British pounds are needed in order to purchase one euro. For example, when the EUR/GBP is trading at 0.7500, it means 1 euro is equivalent to 0.75 British pounds.  The euro is the world’s second most traded currency, whilst the British Pound (GBP) is the world’s third most traded currency, resulting in a comparatively liquid trading pair. While the spreads of currency pairs vary from broker to broker, the EUR/GBP often stays within the 1 pip to 3 pip spread range.This may make it seem like a decent candidate for scalping, although its low range can be a hindering factor, similar to the EUR/CHF. What Makes the EUR/GBP Unique?As mentioned, EUR/GBP is seen as a viable pair for scalping, due to its relatively predictable price action, and low stable spread. Intraday trading the EUR/GBP however does generally require more patience compared to other pairs.From a technical standpoint, it follows that as EUR/USD and GBP/USD are positively correlated, EUR/GBP’s volatility is going to be less than the two aforementioned majors’. Perhaps more so than any other, this currency pair has been continually affected by ongoing Brexit discussions in the UK. Presently, there is no consensus on how the situation will be resolved, something that has influenced the EUR/GBP and will do so until a resolution is agreed upon.
Read this Term
, the pair initially moved higher and extended above its 100 day moving average at 0.84175. Recall from yesterday that moving average stalled the rally.

The break higher today could not be sustained (it reached a swing level resistance target as well). The price has since moved back below that moving average level and currently trades at 0.8394. There are some swing levels below at 0.8385 and below that at 0.8376 to 0.8378. Move below those levels and buyers should turn increasingly more to the sell side.

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EURGBP

EURGBP backs off after initial run higher
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A.R Chowdhury

A.R Chowdhury

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