Browsing: EUR/USD Forecast

EUR/USD looked sharp last week, posting gains of 1.0%. It’s a quiet week, with just four events. Here is an outlook at the highlights and an updated technical analysis for EUR/USD.

ECB policymakers sent a dovish message to the markets after their policy meeting. The ECB surprised the markets by revising its forward guidance, saying that it would not raise interest rates prior to the middle of 2020. Previously, the bank had said that it would not hike rates before the spring of 2020. The delay is a response to weak economic conditions in the eurozone, as the global trade war has taken a toll on manufacturing and exports in Germany and the rest of the bloc.

As expected, ECB President Draghi said that ECB will pay banks to borrow funds from the central bank, if the funds are passed on to consumers and small businesses. This is a stimulus measure with the aim of boosting spending in the private sector. As well, the bank upwardly revised its 2019 outlooks for growth and inflation. In March, the ECB forecast GDP at 1.1% and inflation at 1.2% – these were revised to 1.2% and 1.3%, respectively.

It was a tough week for the U.S. dollar. Nonfarm payrolls were dismal, falling to just 75 thousand. This was well below the forecast of 177 thousand. Earlier in the week, the greenback retreated after comments from senior Federal Reserve officials strongly hinted at a rate cut. In recent months, the Fed has presented a neutral stance regarding rate moves, but made a sharp U-turn last week in favor of an easing bias. On Tuesday, Fed chair Jerome Powell said that the Fed would “act as appropriate to sustain the expansion”, and analysts noted that he did not mention his “patient” approach to monetary policy, which has been a buzzword in Powell’s recent comments. Powell’s remarks echoed comments from James Bullard, president of the St. Louis Fed. Bullard stated that the Fed might have to lower rates shortly due to low inflation and the ongoing trade war with China. Bullard added that the current benchmark rate, which is at a range of 2.25% to 2.50%, is too high for current economic conditions, and recommended lowering rates in order to stabilize the economy.

EUR/USD daily chart with support and resistance lines on it. Click to enlarge:

  1. Sentix Investor Confidence: Tuesday, 8:30. This survey of 2,800 analysts and investors surprised the markets, posting a score of 5.3 in May. This ended a nasty streak of five straight declines. The June forecast stands at 2.3.
  2. German Final CPI: Thursday, 6:00. The preliminary estimate for April showed a small increase of 0.2%. The final measure will likely confirm it. Any change in the German number will impact the all-European final figure which will be released next week.
  3. Industrial Production: Thursday, 9:00. Industrial output for the whole euro-zone is published after the main countries will have published their own data. Still, the overall eurozone reading tends to surprise the markets. The indicator came in at -0.3% in March, its fourth decline in five months. The markets are braced for more bad news in April, with an estimate of -0.4%.
  4. French Final CPI: Friday, 6:45. Inflation in the second-largest economy in Europe slowed to 0.2% m/m in May according to the initial read. The final release is expected to remain unchanged at 0.2%.

* All times are GMT

EUR/USD Technical analysis

Technical lines from top to bottom:

With EUR/USD posting sharp gains last week, we start at higher levels:

We start with resistance at 1.1750. Close by, 1.1720 is a veteran line that worked in both directions and it capped the pair in mid-September.

1.1620 has held in resistance since early October. 1.1570 is next.

1.1515 was a high point at the end of January. 1.1435 was a low point at the beginning of February.

1.1390 was a stepping stone on the way up in late January and capped EUR/USD earlier. This is followed by 1.1345, which was tested late in the week.

1.1290 has switched to a support role. Close by, 1.1270 was a double-bottom in December 2018.

The pair broke through resistance at 1.1215 for the first time since mid-May.

1.1119 (mentioned last week) has some breathing room in support after sharp gains by EUR/USD last week.

1.1025 was a cap back in May 2017.

1.0950 is the final support level for now.

I am bearish on EUR/USD

Dovish comments from the Fed boosted the euro last week, but this could prove to be a brief spike for the euro. The U.S. economy remains in great shape and the ECB has introduced new stimulus and delayed the timing for a rate hike. This stance could sour investors on the euro.

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EUR/USD Forecast, Technical Analysis, Outlook ► preview of the major events that move Euro/Dollar during the week. Here are some general data. Scroll down for the latest EUR/USD forecast.

EUR/USD characteristics

Euro/dollar is the world’s most popular currency pair for both retail and institutional traders. 19 European countries that vary quite a bit from each other share the single currency. The key countries are Germany, France, Italy and Spain. The US dollar is the reserve currency of the world.

A wide trade surplus, originating mostly from German exports, means that funds are flowing into the euro area. When markets are calm, this influx pushes the common currency higher. However, the eurozone has its share of economic and political issues and speculation takes its toll.

The euro debt crisis engulfed Greece, Portugal, Ireland, Italy, and Spain. While the worst may be behind us, it is always looming. The leadership of the European Central Bank and President Mario Draghi helped stabilize and even save the euro. His “whatever it takes” speech in July 2012″ was a turning point. The diverse countries are linked by a monetary union but not a fiscal one, and this remains the Achilles heel.

EUR//USD trading is often choppy, especially when it is confined to narrow ranges. When the pair is in trend, past technical lines, even those from 2003, are respected quite nicely. €/$ has a “good memory”.

EUR/USD recent moves

The euro-zone economies are growing at a robust pace in 2017. Unemployment is falling and even core inflation is finally rising albeit temporarily All this has led to optimism that sent the euro higher.

The ECB will halve bond-buys to 30 billion euros from January 2018. However, it left the door open to extending the QE program beyond September, and this hurt the euro. A weaker euro makes exports more attractive and pushes imported inflation higher. Draghi is happy with growth but worried about inflation.

The political uncertainty in Germany is becoming an issue after inconclusive elections in September. A fresh round of elections joins the crisis in Catalonia and the political instability in Italy.

In America, hopes for fiscal stimulus faded early in the year, but are now on the rise again, with Trump’s tax plan. The Federal Reserve has maintained its plan for three rates hikes in 2017 despite lower US inflation.

Latest weekly EUR/USD forecast

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