EUR/USD to Finish 2023 on a High: Dip-Buying Should Be Your Go-To Strategy
The EUR/USD pair has been struggling but still largely edging higher in recent times, as it looks to finish the month and year in positive territory.
At the time of writing, the single currency was up about 2.3% against the dollar in 2023, in what has been a largely unexciting year for the EUR/USD traders.
It posted small gains in Q1 and Q2, before falling sharply in Q3. So far in Q4, it has made back a good chunk of those losses to hold in the positive territory, but still well below the year’s high of 1.12375 hit in July.
Consistently poor economic data from the Eurozone has prevented the single currency from staging a more meaningful recovery, but it nevertheless looked set to avoid a hattrick of yearly losses.
Supported largely by a bullish tone across financial markets and a falling US dollar, the EUR/USD could further extend its recovery in the early parts of 2024.
We might see more weakness in upcoming US data, as that will encourage the Fed to cut rates sooner and more forcefully than anticipated.
Recent data pointers from the US have largely surprised to the upside, casting doubts over expectations that the world’s largest economy is about to fall into a recession.
It has weathered the impact of high inflation and rising interest rates much better than most other parts of the world.
But the Fed has signaled interest rates will be cut a few times next year and the market has responded by pushing bond yields and the dollar lower accordingly.
If more signs emerge that the US economy is weakening, then that could further weigh on bond yields and underpin risk assets, including the EUR/USD.
The key risk for the EUR/USD therefore is if the dollar becomes stronger due to further signs of resilience in the US economy.
I
Read more on investing.com
