EUR/USD Parity Odds Still on but Greenback Might Hit Hard Wall First
One is backed by the “higher-for-longer” rates mantra and the other by what can now be termed “lower-for-longer” rates preference. The odds of the US dollar reaching parity with the euro are still there but charts suggest the greenback will probably hit stiff resistance soon after rising relentlessly since the end of July.
At the time of the writing, the EUR/USD reading stood at an intraday low of 1.0572, indicating the euro at its lowest against the dollar since March, when Europe’s so-called single currency sunk to 1.0516.
EUR/USD parity, meaning a level of 1.0 or lower, was last achieved almost a year ago, in November 2022, when the euro fell to as low as 0.9729. At the current pace of the single currency’s slide — and the dollar’s charge — the chance of that recurring imminently has little probability.
Yet, forex traders are open to the odds that it could happen before the end of the year given the Federal Reserve’s doggedness in returning U.S. inflation to its long-term target of 2% from a current headline level of 3.7%, as measured by the Consumer Price Index.
In fact, the dollar’s two-month rally has been powered by the Fed’s renewed hawkish bent in wanting to add to rates as necessary in the coming months to achieve its target on inflation.
“As long as the euro-dollar pair remains below 1.0610, downside pressure continues for the single currency,” said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
“The strong dollar keeps the euro under severe bearish pressure. Further down, the major downside target is seen at the 50% Fibonacci level of 1.0409. Reclaiming stability above the 200-day SMA, or Simple Moving Average, of 1.0828 will be the first sign of recovery in the EUR-USD pair.”
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