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Eur-Usd target reached! Now what?

On the first of February 2021, the first analysis of this blog was dedicated to Eur-Usd (Eur-Usd fundamental analysis) at the end of which, with the currency pair above 1.20, I indicated my medium to long-term target in the 1.13/1.1350 area. Yesterday, 16 November, after nine and a half months, Eur-Usd reached that area.

I am not here to self-celebrate but to express a much more important concept, which is the very essence of trading. If you want to earn money with Forex, if you want to make trading your profession, you have to be able to analyse the market clearly and precisely. You need to understand whether a currency pair has a correct value or should be higher or lower.

Only if you know how to make an ad-hoc analysis, you will know what you have to do and, if the conditions do not change in the meantime, you will see the currency pair arrive at the correct value you set. Just as happened with Eur-Usd.

In these nine and a half months the conditions have not changed, on the contrary, they have strengthened in the direction I identified. Anyone with the right and correct knowledge to analyse a currency pair would have come to the same conclusion as me.

So, it is not a question of being good, but of knowing how to analyse a market correctly. Only in this way, you will know how that currency pair will move. Then, the variables are many and it happens that the initial conditions change. To me, it has happened more times of having to review my analyses because the reasoning that had carried me to those conclusions was not more valid. It is part of the trading; nobody will ever close all the operations in gain.

Always remember that nobody can teach you to trade, at the most, it can explain to you as he or she trades, but we are not all equal and everyone has their own ideas, characteristics, feelings... Every one of you must trade in the way to him or her more congenial and not to follow the model of someone else because you will end up finding yourself in difficulty.

In my books, I do not explain how you should trade, but how you should correctly analyse a currency pair or a commodity. I may give guidelines such as maximum loss percentages or capital used, but in the end, it is you who must make all the decisions, creating your own trading model that fits you perfectly, based on your personality.

So, what now? What will happen to Eur-Usd? There are many variables that could affect the future performance of the currency pair. The fourth wave of Covid-19 in Europe is leading to new restrictions; this will certainly affect some economies in the Eurozone countries. The upcoming ECB and Federal Reserve meetings in December.

In this regard, below is a chart that I posted on my Twitter account a few days ago.

This is the chart of the 30-Day Fed Funds futures, more precisely the ZQZ21-ZQZ22 spread (i.e., the December 2021 expiry minus the December 2022 expiry). What this chart tells us is that the odds of the Fed raising interest rates in 2022 not by 25 basis points but by 50 basis points are, as of today, 100%. Certainly, at this point, the next Economic Projections to be released by the Federal Reserve at its next meeting on 16 December (in addition to Powell's words) will be interesting.

Therefore, it is not excluded that after a rebound, Eur-Usd could continue to fall with first targets 1.12200 - 1.10800/1.11400 - 1.10200. As highlighted in the chart below.

In conclusion, at the moment we have a weak Euro and a strong Dollar (against almost all other currencies except the Chinese Yuan) but much will depend on the next monetary policy decisions of the central banks, the evolution of the situation on the Covid-19 front and macro data, primarily inflation and consumption.

Eur-Usd reached my target, now what? There are many variables that could affect the future performance of the currency pair. The fourth wave of Covid-19 in Europe is leading to new restrictions

David is a trader with over 25 years of experience (two years as a fund manager) in currencies and commodities. He collaborates with a major European commodity investment company, and he is the author of several successful books about trading and financial markets.

1 Comment

  1. R k Sandhu says:

    Hello David sir please add in your analysis macro events.who currency provide to strength and weakness

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