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  • ECB policymakers are drumming up support for a more aggressive policy.
  • Markets are cautious ahead of US inflation data.
  • EUR/USD is back above parity.

Today’s EUR/USD forecast is bullish as the euro surged to a more than three-week high against the dollar. This move was in response to arguments for more aggressive monetary tightening from European Central Bank policymakers.

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ECB policymakers see a growing possibility that they may need to increase their benchmark interest rate to 2% or more to reduce record inflation in the eurozone.

On the other hand, the dollar index barely changed at 108.78, after retreating from a two-decade peak of 110.79 achieved on Wednesday. Investors are cautious ahead of Tuesday’s US CPI report even though Fed officials maintained their hawkish stance on Friday.

“Officials have clearly articulated the need for the FOMC to keep raising interest rates until there is compelling evidence that inflation is falling,” Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note.

“Regardless of the outcome of the CPI report, we judge the FOMC has much more work to do, meaning more upside for the dollar over the short and medium terms,” he said.

If the dollar resumes its bull rally, it could mean more downside for EUR/USD.

EUR/USD key events today

EUR/USD investors expect a speech from the Vice-President of the European Central Bank, Luis de Guindos. There will also be a speech from a Member of the European Central Bank’s Executive Board, Isabel Schnabel.

EUR/USD technical forecast: Bulls maintaining above parity

EUR/USD forecast

The 4-hour chart shows the price trading well above the 30-SMA and RSI above 50. There is no doubt that bulls are in control after a long battle around the 1.00006 key psychological level. The psychological level was used as support and resistance before the price finally broke above the 1.00508 resistance level.

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This resistance level was keeping buyers from pushing the price higher. Every time the price reached this level, sellers pushed it lower. Buyers broke above and retested this level before the price shot up in an impulsive move. This move marked the beginning of a bullish trend and might pause at 1.02008 before continuing higher. The trend will remain bullish if the price stays above the 30-SMA.

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