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Forex chart patterns: US-EU rate gap widens, pressuring EUR/USD; Russian gas cuts spur HUF selloff

By Piero Cingari

15:09, 27 July 2022

eur/usd chart
Data analyzing in foreign market: EUR/USD chart on display – Photo: Shutterstock

As traders await the Federal Reserve's back-to-back 75-basis-point rate hike today, Europe faces an unprecedented energy crisis, with Russia drastically reducing gas supplies in the Nord Stream 2 pipeline and political divisions emerging among member states after the European Commission urged them to reduce their demand for natural gas by 15% this winter.

The EUR/USD pair fell 1% yesterday and is currently trading at 1.013 (+0.1% today) at the European market close. 

As the market bets that the ECB will not be able to continue aggressively raising interest rates, short-term bond yields in Germany have declined in response to rising fears of a recession and a natural gas supply shortage.

Germany 2-year yields fell to 0.4%, down 26 basis points from the previous week. The rate differential between the United States and Germany at the 2-year maturity has widened to 2.67%, remaining close to yearly lows.

Recessions risks for the eurozone spiked today after JP Morgan downgraded the Eurozone’s economic growth outlook, predicting a mild recession between the fourth quarter of 2022 and the first quarter of 2023. Germany also released the worst ever GFK consumer confidence figure in August (-30.6).

Yesterday, the International Monetary Fund cut the eurozone's growth forecast for this year to 2.6% (-0.2pp compared to April forecasts), and to 1% for 2023 (-1.1pp compared to April).

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Chart of the day: Widening US-Germany yield differentials add to EUR/USD's downside risk

a chart showing the correlation between US and Germany short term yield spread and EUR/USDEUR/USD vs 2-year US-Germany yield spread (inverted axis) as of July 27, 2022 – Photo: Capital.com / Source: Tradingview

Currency strength matrix - July 27, 2022

A forex table that compares nine major currencies against each other, including USD, EUR, GBY, JPY, CHF, AUD, NZD, CAD and NOKCurrency strength matrix - July 27, 2022 (16:30 UTC) – Photo: Capital.com

Forex market today – July 27, 2022

Leading up to today's FOMC meeting, major pairs are relatively stable.

The New Zealand dollar (NZD/USD) is experiencing a day of weakness (-0.45%), extending yesterday's decline (-0.4%), as risk sentiment towards high-beta currencies remains quite depressed.

The outperformer is the Norwegian krone (NOK), which gained 0.7% on the day against the greenback (USD/NOK), as worries on Russian supplies fuelled purchases on alternative gas producers such as Norway. 

USD/JPY

151.30 Price
-0.030% 1D Chg, %
Long position overnight fee 0.0113%
Short position overnight fee -0.0195%
Overnight fee time 21:00 (UTC)
Spread 0.010

AUD/USD

0.65 Price
-0.290% 1D Chg, %
Long position overnight fee -0.0073%
Short position overnight fee -0.0009%
Overnight fee time 21:00 (UTC)
Spread 0.00006

EUR/USD

1.08 Price
-0.200% 1D Chg, %
Long position overnight fee -0.0080%
Short position overnight fee -0.0002%
Overnight fee time 21:00 (UTC)
Spread 0.00006

AUD/USD_zero

0.65 Price
-0.280% 1D Chg, %
Long position overnight fee -0.0073%
Short position overnight fee -0.0009%
Overnight fee time 21:00 (UTC)
Spread 0.00006

However, Central Eastern European (CEE) currencies are attracting market attention as they weaken substantially due due to rising recession fears in Europe and Russian gas supply issues.

The worst-performing currency today is the Hungarian forint (HUF), followed by the Polish zloty (PLN). The dollar-forint and dollar-zloty exchange rates are both rising significantly as a result of intense selling pressure on CEE currencies.

The USD/HUF exchange pair is up 1% on the day, marking the fourth consecutive session of gains. The USD/PLN pair rose by 0.8%.

USD/HUF technical analysis: three white soldiers bullish pattern

a chart showing USD/HUF exchange rateUSD/HUF technical analysis: three white soldiers candlestick pattern, ascending channel and rising RSI – Photo: Capital.com / Source: Tradingview

Performance of forex pairs as of July 27, 2022

When it comes to USD/HUF technical analysis, the candlesticks analysis provides a strong bullish signal generated by the three white soldiers pattern. This pattern can be identified by the appearance of three green candles in a row, each with a higher open and close than the previous day.

The USD/HUF pair has crossed the 400-mark, returning to 2-week highs after a 7 percent decline from its July 12 high to the end of last week..

The confirmation of the bullish trend and the strong momentum of buyers (the RSI is on the rise) could lead USD/HUF to test the next resistance levels at 406 (July 15 Highs) and then the all-time high of 414 reached on July 12.

A forex table showing the performance of US dollar and the euro against other currenciesPerformance of forex pairs as of July 27, 2022 (16:30 UTC) – Photo: Capital.com

Markets in this article

EUR/USD
EUR/USD
1.08051 USD
-0.00214 -0.200%
NZD/USD
NZD/USD
0.59793 USD
-0.00246 -0.410%
USD/NOK
USD/NOK
10.83425 USD
0.05266 +0.490%
USD/PLN
USD/PLN
3.98989 USD
0.00387 +0.100%
USD/HUF
USD/HUF
365.558 USD
0.751 +0.210%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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