Can the Euro and Pound Align at Parity Against the US Dollar Before 2023?
A few weeks ago, on September 26, the British pound became almost equal to the US dollar. GBPUSD has not attained parity since 1985 but this time was very close, as the US dollar reached its highest levels in two decades. EURUSD, on the other hand, has been oscillating between 1.05 and 0.95 since June 6, 2022.
While we anticipate a breakout of the range on the EURUSD chart, we may see EURUSD and GBPUSD stalling at the parity price level.
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What Is the Parity Level?
The Britannica encyclopedia defines the parity level or the parity price level as a situation with equality in price, exchange rate, purchasing power, or wages. For the scope of this article, we will focus on the exchange rates. In essence, when the value of 1GBP = 1USD, or 1EUR = 1USD, then we can say price is at the parity price level.
US Dollar Chart
The daily timeframe shows that the US Dollar is at a critical level – 76.4% of the Fibonacci retracement. There is also a confluence of other notable factors, such as the 200-Day Moving Average, and the Drop-Base-Rally demand zone. These factors point to the possibility of a bullish reversal.
GBP/USD Outlook
On the daily chart of GBPUSD, the trendline resistance from May offers the first essential confirmation for a bearish direction. There is also a Rally-Base-Drop supply zone and the upper boundary of an ascending channel. Should you add a 200-period Simple Moving Average to the chart, you will observe another confluence for the bearish move.
EUR/USD Outlook
EURUSD presents a slightly more exciting set-up in the form of a classic AMD pattern (a Smart Money Concept, a.k.a. Accumulation, Manipulation, and Distribution). To the left of the upper hollow rectangle, we see an area of accumulation, followed by a fake-out to the upside (Manipulation), before we finally see the Distribution.
The peak of the Manipulation, having provided a Rally-Base-Drop supply zone, as marked by the same rectangle, is expected to restore a bearish impulse for the price.
Let’s take a closer look at this chart.
Here we see the supply zone, trendline resistance, 200-Day Moving Average, and the 76.4% Fibonacci level all serving as confluences for a bearish movement.
Conclusion
If these ideas play out as shown, we will see 1GBP=1USD=1EUR before the end of the year. It would be a remarkable incident haven’t been observed in decades.