|

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.

1 Week
Avg Forecast 1.0559
100.0%85.0%14.0%010203040506070809010000.10.20.30.40.50.60.70.80.910
  • 14% Bullish
  • 71% Bearish
  • 14% Sideways
Bias Bearish
1 Month
Avg Forecast 1.0498
100.0%83.0%18.0%010203040506070809010000.10.20.30.40.50.60.70.80.910
  • 18% Bullish
  • 65% Bearish
  • 18% Sideways
Bias Bearish
1 Quarter
Avg Forecast 1.0343
100.0%80.0%5.0%0010203040506070809010000.10.20.30.40.50.60.70.80.910
  • 5% Bullish
  • 75% Bearish
  • 20% Sideways
Bias Bearish

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.

1 Week
Avg Forecast 1.2509
100.0%92.0%71.0%070758085909510000.10.20.30.40.50.60.70.80.910
  • 71% Bullish
  • 21% Bearish
  • 7% Sideways
Bias Bullish
1 Month
Avg Forecast 1.2279
100.0%74.0%21.0%0203040506070809010000.10.20.30.40.50.60.70.80.910
  • 21% Bullish
  • 53% Bearish
  • 26% Sideways
Bias Bearish
1 Quarter
Avg Forecast 1.2174
100.0%70.0%8.0%0010203040506070809010000.10.20.30.40.50.60.70.80.910
  • 8% Bullish
  • 62% Bearish
  • 29% Sideways
Bias Bearish

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.

1 Week
Avg Forecast 112.18
100.0%91.0%33.0%03040506070809010000.10.20.30.40.50.60.70.80.910
  • 33% Bullish
  • 58% Bearish
  • 8% Sideways
Bias Bearish
1 Month
Avg Forecast 114.33
100.0%92.0%71.0%070758085909510000.10.20.30.40.50.60.70.80.910
  • 71% Bullish
  • 21% Bearish
  • 7% Sideways
Bias Bullish
1 Quarter
Avg Forecast 115.27
100.0%67.0%56.0%055606570758085909510000.10.20.30.40.50.60.70.80.910
  • 56% Bullish
  • 11% Bearish
  • 33% Sideways
Bias Bullish

.

Author

Valeria Bednarik

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

More from Valeria Bednarik
Share:

Editor's Picks

EUR/USD tests nine-day EMA support near 1.1850

EUR/USD remains in the negative territory for the fourth successive session, trading around 1.1870 during the Asian hours on Friday. The 14-day Relative Strength Index momentum indicator at 56 stays above the midline, confirming steady momentum. RSI has eased but remains above 50, indicating momentum remains constructive for the bulls.

GBP/USD consolidates around 1.3600 vs. USD; looks to US CPI for fresh impetus

The GBP/USD pair remains on the defensive through the Asian session on Friday, though it lacks bearish conviction and holds above the 1.3600 mark as traders await the release of the US consumer inflation figures before placing directional bets.

Gold trims intraday gains to $5,000 amid modest USD strength ahead of US CPI

Gold retreats from the vicinity of the $5,000 psychological mark, though sticks to its modest intraday gains heading into the European session. Traders now look forward to the release of the US consumer inflation figures for more cues about the Fed policy path. The outlook will play a key role in influencing the near-term US Dollar price dynamics and provide some meaningful impetus to the non-yielding bullion.

Solana: Mixed market sentiment caps recovery

Solana is trading at $79 as of Friday, following a correction of over 9% so far this week. On-chain and derivatives data indicates mixed sentiment among traders, further limiting the chances of a price recovery.

A tale of two labour markets: Headline strength masks underlying weakness

Undoubtedly, yesterday’s delayed US January jobs report delivered a strong headline – one that surpassed most estimates. However, optimism quickly faded amid sobering benchmark revisions.

Solana Price Forecast: Mixed market sentiment caps recovery

Solana (SOL) is trading at $79 as of Friday, following a correction of over 9% so far this week. On-chain and derivatives data indicates mixed sentiment among traders, further limiting the chances of a price recovery.