|

EUR/USD Forecast: 3 fundamental factors in favor of the upside, and technicals are not too bad either

  • EUR/USD treads water in familiar ranges amid trade hopes.
  • Draghi and Fed officials will be speaking today. 
  • The technical picture is slightly positive for the pair.

EUR/USD trades around 1.1350, sticking to familiar ranges and not going anywhere fast. There are three fundamental reasons to favor the upside for the pair.

Here they are, in ascending order.

1) Trade optimism

Optimism on trade talks between the US and China keeps the pair supported.

China has offered to buy more US goods in order to balance the broad trade surplus it has with the US. US President Donald Trump will meet Chinese PM Liu He late in the day, and the announcement of the encounter sparked hopes. There have been no reports on progress on structural changes such as intellectual property.

2) Euro-zone looking better

The euro also has its own reasons to rise, or at least stabilize. Euro-zone purchasing managers' indices for February, published on Thursday, came out mostly above expectations. Is the euro-zone bottoming out? Perhaps not so fast, as the all-important German manufacturing sector still seems to struggle. German Q4 GDP was confirmed at 0%. Nevertheless, things may be as bad as previously seen.

The German IFO Business Climate is projected to remain stable in the fresh report for February. European Central Bank President Mario Draghi will be speaking later in Bulgaria and may shed some more light on recent developments. Several of his colleagues spoke out on Thursday and expressed concerns about the slowdown.

3) US weakness

Things are not that rosy in the US either. The belated Durable Goods Orders report for December came out better than expected on the headline but missed on the all-important non-defense ex-air measure with -0.7%, lowering growth forecasts. Existing Home Sales also fell short of projections with 4.94 million annualized, exposing the weakness of the housing sector once again. 

No less than four Fed officials will be speaking late in the day. The most notable ones to watch are Vice Chair Richard Clarida and New York Fed President John Williams, No. 2 and No. 3 respectively. The No. 1, Chair Jerome Powell, will testify on Tuesday.

Their speeches may be overshadowed by developments on trade, amid the Trump-Liu meeting. If we receive further positive news, EUR/USD has room to rise.

EUR/USD Technical Analysis

EUR USD Technical Analysis February 22 2019

The technical picture is also improving for the pair. Momentum remains to the upside and the price holds up above the 50 Simple Moving Average on the four-hour chart. 

1.1350 remains a battle line, capping euro/dollar early in the day. 1.1372 was the high point this week and serves as a considerable resistance line. 1.1390 and 1.1405 worked as support lines in January and now await the pair as resistance.

EUR/USD may find initial support at 1.1330, the low of the day, followed by 1.1320, which was a bottom earlier this week. 1.1295 worked in both directions earlier in February and 1.1275 was the trough this week. 1.1250 and 1.1235 are next down the line.

More: US Dollar: Looking for the next trend

Author

Yohay Elam

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

More from Yohay Elam
Share:

Editor's Picks

GBP/USD weakens to two-week lows near 1.3520

GBP/USD trades on the back foot, returning to the low 1.3500s, or two-week troughs, on Tuesday. Cable’s bearish price action follows decent gains in the Greenback at the time when investors assess latest US data releases and the persistent uncertainty in the US-Iran crisis.

EUR/USD remains offered; breaks below 1.1600

EUR/USD now accelerates its daily correction, breaching below the key 1.1600 support level on Tuesday. The pair’s daily correction comes on the back of a decent bounce in the US Dollar despite disappointing US data releases and amid persistent geopolitical concerns.

Gold flirts with multi-week lows near $4,300

Gold accelerates its correction and recedes toward the key $4,300 mark per troy ounce on Tuesday. The yellow metal’s persistent decline comes in response to the solid performance of the US Dollar and a sharp move higher in US Treasury yields across the curve.

RBNZ set to raise interest rate to 2.75%
The Reserve Bank of New Zealand (RBNZ) is on track to deliver a follow-through interest rate hike, raising the Official Cash Rate (OCR) by another 25 basis points (bps) from 2.50% to 2.75% on Wednesday. Experts expect a consensus decision this week, unlike a deeply divided outcome predicted during the July monetary policy meeting.
Global bond market sell off haunts markets

Global sovereign bonds are selling off as we start a new month. The UK is, unsurprisingly, taking the biggest hit. Two and 10-year yields rose by 10 basis points at one point on Tuesday, and are currently higher by 7 and 8bps respectively.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.