EUR/USD Forecast: no love for the EUR
|The EUR/USD pair closed the week in the red sub-1.0600, although off its weekly low of 1.0520, as the dollar lost momentum following FOMC's Minutes and comments from US Treasury Secretary Mnuchin.
Many US policy makers vowed for a rate hike "fairly soon," but market's confidence about a March hike tumbled amid officers' uncertainty about fiscal policies. On Thursday, US Treasury Secretary Mnuchin expressed his concerns about the high levels of US debt, while adding that new policies would have a limited impact on the economy during this 2017. Also, he said that he "hopes" that the tax reform will pass the Congress by August, also cooling down expectations for significant growth during the next few months, referring tax cuts focused on mid-class, with no mentions to corporate rates.
Despite broad dollar's weakness, the common currency was unable to advance beyond the early week high at 1.0632, undermined by political woes in the region, ahead of French, Dutch and German elections.
With no certain catalyst behind the move, the American dollar advanced sharply against all of its major rivals right before Wall Street's opening and ahead of the release of the Michigan Consumer Sentiment index, which resulted better-than-expected for February, up to 96.3 from 95.7 in January. New Home sales for January, however, missed expectations up by 3.7% against a 6.3% advance expected, to an annualized rate of 555,000.
Technical readings indicate that the risk remains towards the downside, as the price failed to advance beyond a daily descendant trend line coming from this year high of 1.0828, whilst the price remained well below its 20 and 100 DMA's both bearish in the 1.0650/60 region. Additionally, technical indicators in the mentioned time frame have pared their advances within negative territory, and turned back south. In the weekly chart a strongly bearish 20 SMA above the current level keeps leading the way lower, while the RSI indicator heads south around 40, and the Momentum hovers around its 100 level, lagging amid reflecting the weekly opening.
There's an ongoing battle between bulls and bears around 1.0565, the 23.6% retracement of the post US-election slide, with the price unable to move too far away from the level. The weekly low of 1.0520 is the immediate support, with a break below opening doors for an extension towards the 1.0400/40 price zone next week, should dollar's recovery persists until today's close.
To the upside, the immediate resistance comes at 1.0630/60, whilst selling interest is aligned between 1.0700 and 1.0720, so it will take a clear break above it to see the pair recovering ground, with the next line of massive selling awaiting in the 1.0800/40 region.
The FXStreet weekly Forecast poll shows that sentiment favors the greenback seen generally higher against most of its major rivals. In the case of the EUR/USD, the pair is expected to fall in all the time frames analyzed, and targeting a retest of the multi-year low of 1.0340 posted early January in a three-month view. Regardless latest political developments in the US, is clear that European political turmoil is driven sentiment, situation that will likely persist until the summer.
The Pound however, is seen advancing modestly next week, pretty much holding around 1.2500 but with 71% of polled experts aiming for an advance. However, things change in a 1-month view, when PM May is expected to trigger the Brexit process, with bears leading the way towards 1.2280. In the longer view, bears increase to 62%, with the pair, however, seen holding above the 1.2100 region.
As for the USD/JPY pair, bears account for the 58% weekly basis, but the pair is not seen breaking below 110.00. In the longer run, the pair is seen recovering, with bulls jumping to 71% in a 1-month view and targeting 114.30. Interesting, for the 3-month view, bulls still are a majority, but 33% of the polled analyst turn neutral, leaving an average target of 115.20, as chances of a break beyond 116.00 are directly linked to a US rate hike, and seems the market won't get one before June.
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