EUR/USD Forecast: greenback in the Hole
|The EUR/USD pair close the week on a higher note, as after a dull week that kept the pair confined to a tight 100 pips range, it broke higher, hit a fresh 2017 high, following Yellen and Draghi's speeches within the Jackson Hole Symposium. The head of the Fed made no comments on monetary policy in her prepared remarks, but opted to defend the banking regulations put in place after the latest financial crisis, , vowing for "modest" changes in financial regulations, contradicting US President Trump desire of taking down to Dodd-Frank reform. The speech said that such action, "will result sooner or later in the all-too-familiar risks of excessive optimism, leverage, and maturity transformation reemerging in new ways that require policy responses. We relearned this lesson through the pain inflicted by the crisis."
The absence of monetary policy comments alongside with the defiant stance, has been quite a surprise for investors, as by general consensus, the market was waiting for some clarity over how and when the Federal Reserve will start shrinking its balance sheet.
As for ECB's Draghi, it took him just to say that global recovery is firming up, to send the pair up to 1.1940, level last seen in January 2015. He speech focused on criticizing protectionism rather than on monetary policy, indicating that multilateral cooperation is crucial in responding to concerns about fairness, and that a turn towards protectionism would pose a serious risk for continued productivity growth and potential growth in the global economy.
Establishing around 1.2920, the technical picture shows that the pair is poised to extend its advance, given that in the weekly chart, it bounced from its 200 SMA, still far above a bullish 20 SMA and also the 100 SMA, while the Momentum indicator barely retreated from overbought readings, but the RSI indicator already resumed its advance within overbought territory, heading north around 75. In the daily chart, and after spending the week hovering around a horizontal 20 DMA, the pair finally managed to rally above it, while technical indicators gain upward strength above their mid-lines, in line with additional gains for the upcoming week, firstly towards 1.2000, but with scope now to extend gains up o 1.2330, a major long term resistance, on a break above 1.2080.
A long term ascendant trend line comes next week around 1.1660, which is also the lowest for the past 4 weeks, meaning that bulls won't give up as long as the level holds. In the middle, 1.1730, this week low, is the first critical support to take care of next week.
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