As summer trading conditions affect financial markets, the week ahead may be different because volatility may rise. Despite Friday being the first trading day of the new month, the Non-Farm Payrolls release is postponed for one more week.
But traders do have plenty of market price action to watch and interpret, as the ECB Forum on Central Banking starts tomorrow. Policymakers from the world’s central banks meet in Sintra, Portugal, to discuss the response to rising inflation and the challenges posed to monetary policies by the war in Ukraine and lockdowns in China.
Naturally, the volatility of the euro pairs will be higher than usual. Out of all the euro pairs, one, in particular, is under severe pressure.
And that is the EUR/USD.
Technical analysis suggests more downside is possible
The EUR/USD exchange rate sits at a critical level. While it has found buyers below 1.05, it failed to rally significantly.
As such, the pressure mounts for the currency pair to threaten a move towards the parity level. A currency pair reflects the value of one currency in terms of another, and when it reaches parity, the two currencies are equal.
The last time the exchange rate crossed parity was in 2002. Then, the common currency rallied to 1.30 before correcting a bit, and then extended the rally to 1.60.
But the 2008-2009 Great Financial Crisis was too much for the EUR/USD. Scared, investors looked for the safety of the world’s reserve currency.
So they sold the euro and bought the US dollar.
After several years, the ECB adopted a dovish policy under Mario Draghi’s leadership. It lasted for more than 8 years, and Draghi went
