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EUR/USD Forex Signal: Euro Finds Buyers as Volatility Retreats – 18 October 2022

The key catalysts for the EUR/USD price will be the upcoming German sentiment data and US industrial and manufacturing production data.


Bullish view

Buy the EUR/USD pair and set a take-profit at 1.00.Add a stop-loss at 0.9700.Timeline: 1-2 days.

Bearish view

Set a sell-stop at 0.9780 and a take-profit at 0.9700.Add a stop-loss at 1.000.

The EUR/USD price continued rebounding as investors breathed a sigh of relief on UK’s fiscal situation. It rose to a high of 0.9864, which was the highest level since October 6 of this year. It has risen by more than 2.27% from the lowest level last week.

Volatility slips

The EUR/USD price continued rising as the market volatility slipped. The CBOE Volatility Index (VIX) dropped by more than 3.50%to $30. Historically, the EUR/USD pair tends to rise when the volatility index falls. At the same time, the Dow Jones, S&P 500, and Nasdaq 100 indices rose by more than 2% in the overnight session.

This price action happened as the China Party Congress continued in Beijing. In it, he Xi Jinping pledged to continue growing the economy in a balanced manner in what he terms Common Prosperity.

It also rose after the decision by Lizz Truss to change the country’s chancellor. She replaced him with Jeremy Hunt, another Tory member. In his first statement, he said that the country will do away with some of Kwasi Kwarteng’s tax cuts worth over 32 billion pounds. Hunt said that he will keep the 13 billion pound National Insurance and cut to stamp duty.

These measures will not have a direct impact on the EUR/USD. Instead, the pair rose because risks of a UK default declined following the repeal.

Meanwhile, the pair rose because of the ongoing financial results of big American banks. On Friday, companies like JP Morgan and Citigroup announced relatively strong earnings. And on Monday, Bank of America said that the American consumer was in a good place. As such, these results helped lower volatility in the financial market.

The key catalysts for the EUR/USD price will be the upcoming German sentiment data and US industrial and manufacturing production data.

EUR/USD forecast

The 4H chart shows that the EUR/USD price has made a strong bullish comeback in the past few days. This rebound has moved slightly above the 25-day and 50-day moving averages. It has moved above the ascending trendline shown in green while the Relative Strength Index (RSI) has continued rising.

The pair has also formed a small inverted head and shoulders pattern. Therefore, there is a likelihood that the pair will continue rising as bulls attempt to move back to the parity level at 1.000. A move below the support at 0.9750 will invalidate the bullish view.

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