Over the last two years or so in particular, the respective central banks for the Eurozone and the United States have had quite a monetary policy divergence. It means when one central bank is cutting rates and or conducting monetary stimulus, the other is doing the opposite and raising interest rates typically.
Looking at EUR/USD via the weekly chart view, these underlying fundamentals can clearly be observed. In early 2018, the price was trading up at around 1.2500, before largely losing ground and coming under much pressure south. It was down to the above-described monetary policy divergence.
The ECB had been conducting a variety of forms of monetary stimulus, their policy was loose. In the United States, however, they had been tightening monetary policy, the FOMC was within a rate hiking cycle.
Things of course now have greatly changed, the divergence between the two central banks has largely been minimized. The FOMC as recently seen is cutting interest rates, with further action still expected, in addition to offering a hefty $1.5 trillion in short-term loans to stimulate the economy.
Whereas, the ECB is not further cutting rates for now and has only made small tweaks to their existing stimulus programs. The reason for this is because the European Central Bank has practically almost exhausted all within its own weaponry.
EUR/USD weekly chart (To see and understand full fundamental and technical opportunities around this, please check out our membership.
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