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FX.co ★ 27.09.2022: European session – Euro’s recovery canceled? Outlook for EUR/USD and GBP/USD.

27.09.2022: European session – Euro’s recovery canceled? Outlook for EUR/USD and GBP/USD.

Although the pound sterling is gaining in value, it is just a technical rebound after a tumble to an all-time low. In other words, the British currency is still under pressure. The emergency economic plan presented by Liz Truss was highly criticized by not only representatives of the banking sector, but also by the House of Commons. It means that a political crisis could also be added to the already stark list of problems. What is more, investors are expecting the Bank of England to hold an emergency meeting and raise the benchmark rate even more. Notably, the meeting may take place in just a few days. If the expectations fail to meet reality, the pound sterling may collapse to parity against the US dollar. The pound sterling is coming across important historical events, which are influencing all other segments of the currency market. In other words, a lot will depend on the pound’s performance. Since the British pound may reach a parity level, other currencies may also drop significantly. At the beginning of the trading week, the euro hit a new low against the US dollar. The quote decreased to the level of 0.9553 recorded in June 2002. After that, the price rebounded from this level. At the moment, the pair is stagnant. The rise became slower despite significant oversold conditions. If the price consolidates above 0.9700 at least on the four-hour chart, the rebound may turn into a full-scale correction. Once the price hits a fresh low, it will resume falling. Meanwhile, the pound sterling set several records against the greenback. It reached a new all-time low, breaking the level recorded in 1985. As a result, the pair hit 1.0345. From Friday to Monday, the pound sterling lost about 1,000 pips. At the same time, the rebound caused by the extreme overheating of short positions allowed the pair to regain 550 pips. Under the current conditions, speculative activity is still very high, which is causing new price swings. To continue rising, the pair should consolidate above yesterday’s high of 1.0928. If the price settles below 1.0630, it is likely to go on falling.

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