EUR/USD Forecast: Scope for a move to 1.1450… and beyond?
|- EUR/USD keeps moving higher as the greenback remains under heavy selling pressure.
- Potential easing from the Fed at the July meeting (50 bps cut?) keep weighing on the sentiment surrounding the buck along with some lower-than-expected results from the US docket.
- Geopolitical effervescence around US-Iran stays unabated ahead of the key G-20 meeting in Japan on June 28-29.
The march north in EUR/USD remains everything but abated so far at the beginning of the week, extending the upside to the doorsteps of the key 1.1400 the figure.
As usual, markets’ perception of rate cuts by the Federal Reserve as early as the July meeting keeps hurting the mood around the greenback. The buck accelerated its downside on Friday after Minneapolis Fed N.Kashkari favoured a 50 bps rate cut next month. Market’s reaction appears quite exaggerated and traders may be forgetting that Kashkari is a non-voter member and his mega-dovish views are already well known. In the same line and also reinforcing the view of a weaker Dollar, it is true that recent figures from US fundamentals coupled with the ongoing inversion of the yield curve have been collaborating with the pessimism lingering over the US economy.
However, the current up move in EUR/USD could well be corrective only. This is quite possible because the shared currency faces some problems in its own backyard, namely the palpable probability that the ECB could cut rates in the near term and/or restart the QE scheme. In this environment, it is quite reasonable to think that there is no essence for a sustainable move above, say, 1.1500 in the next months. If we add that the ongoing slowdown in Euroland is expected to last longer, well, that just confirms the bearish scenario for EUR once this post-FOMC dust finally settles.
Let’s go to the technical view. EUR/USD, charted a bullish ‘outside candle’ in the weekly chart, opening the door for further strength in the near term and reinforcing at the same time the potential up move to the 1.1450 area, or March tops. The recent breakout of the key 1.1350 region, where coincide the 200-week and 200-day SMAs, has given extra oxygen to the pair and also adds to a move higher in the short-term horizon. When and if the 1.1450 area is cleared, spot should re-focus on 2019 highs in the 1.1570/80 band.
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