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20.10.202209:10 Forex Analysis & Reviews: Hot forecast for EUR/USD on 20/10/2022

Although inflation data was released yesterday, both in the UK and in the euro area, none of this mattered. Largely due to the fact that inflation in the United Kingdom from 9.9% to 10.1% no longer affects anything. The Bank of England openly announced at the beginning of the week that it would continue to tighten monetary policy. And only the final data on inflation was published in the eurozone, which did not differ too much from the preliminary estimate, which had long been taken into account by the market. So the acceleration of inflation in the euro area from 9.1% to 9.9% is no different from the preliminary estimate of 10.0%. In other words, the data could not affect the mood of market participants in any way.

Inflation (Europe):

Exchange Rates 20.10.2022 analysis

Moreover, the focus is now on the political crisis developing in the United Kingdom. Despite the change of the government treasurer and the rejection of the previously proposed tax reduction plan, more and more Conservatives, whose leader is Liz Truss, are demanding the resignation of the prime minister. Although it takes less than two months. Truss was even forced to speak in the House of Commons yesterday, defending and justifying her actions as head of government. So we are really talking about a full-fledged political crisis developing in the context of a growing economic crisis. Which clearly does not give the pound optimism. In turn, the British currency pulled down the euro.

Data on applications for unemployment benefits will be published in the US today, which is unlikely to be able to affect anything, since its number should remain virtually unchanged. The number of initial appeals should grow by only 2,000. The number of repeated requests may also increase by the same amount. And investors have no choice but to continue to follow the developments in the United Kingdom, which will determine the mood of market participants. And given the vector of development of this political crisis, it is too early for the pound to think about any noticeable growth. Rather, we need to prepare for further weakening. And again, due to the absence of any other factors, the single currency will obediently follow the British pound.

The euro has not managed to stay above the benchmark value of 0.9850 against the US dollar. Instead, a stagnation was formed, which eventually led to a downward momentum, pulling the quote below the 0.9800 mark.

The RSI H4 technical instrument crossed the average 50 line from top to bottom during a sharp price change. This step indicates an increase in the volume of short positions.

The MA sliding lines on the Alligator H4 indicator intersect with each other, which corresponds to a signal that the ascending cycle is slowing down.

Exchange Rates 20.10.2022 analysis

Expectations and prospects

At the moment, there is a stagnation within the 0.9750 mark. To prolong the current downward cycle, the quote needs to stay below the variable pivot point. This step will lead to a depreciation of the euro to at least 0.9700.

Traders will consider an alternative scenario of market development in case the price returns above the reference value of 0.9850. In this case, euro bulls will have a second chance to grow.

Complex indicator analysis in the short-term and intraday periods has a sell signal due to the downward move from the value of 0.9850.

*这里的市场分析是为了增加您对市场的了解,而不是给出交易的指示。

Dean Leo,
Analytical expert of InstaSpot
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