EUR/USD Forecast: Still looking bullish after the small correction

The EUR/USD kicked off the week with a retreat from the highs.
Markets are still digesting Powell's words at Jackson Hole.
The technical picture is bullish for the pair.

Yohay Elam FXStreet

The EUR/USD is trading around 1.1600, slightly lower on the day. Movements are limited as the UK enjoys a bank holiday and liquidity is more depressed.

The US Dollar is recovering after dropping on Friday. Fed Chair Jerome Powell was relatively dovish in his speech at Jackson Hole. He signaled further gradual hikes but conditioned them on ongoing growth in GDP and jobs. Also, he does not see inflation as accelerating or the economy overheating.

While a September hike is a done deal, and December is quite probable, further moves are now in doubt. His words weighed on the greenback.

Turkey is back to full swing after a weeklong holiday. The Turkish Lira resumed its falls, and this slightly weighs on the global mood. The USD/TRY remains far from the 7.00 level seen at the peak of the crisis.

Markets remain concerned about the next moves of the US in its trade spat with China. Talks ended inconclusively last week, and the Administration is set to impose new duties next week.

The German IFO Business Climate beat expectations with 103.6 points. The trade truce is cited as one of the reasons for the improvement in business confidence in the continent's largest economy. EU Commission President Jean-Claude Juncker and US President Donald Trump met in late July and agreed to put new tariffs on hold.

Italy said it would veto the EU Budget if its worries about migration are not addressed. Many believe a compromise will be reached.

The calendar is void of top-tier indicators today, but US GDP and euro-zone inflation stand out later in the week,

EUR/USD Technical Analysis

The EUR/USD is trading within uptrend support and uptrend resistance that are not parallel. So far, the pattern holds. The pair broke above the 200 Simple Moving Average on the four-hour chart. Momentum is slightly positive, and the Relative Strength Index is out of overbought territory. All in all, this is a bullish bias.

1.1625 held the pair down last week. Further up, 1.1655 was the high point last week. 1.1720 and 1.1750 are the next levels to watch.

1.1595 was a low point earlier in the day and capped the EUR/USD in the past. More significant support is at 1.1530, where the latest rally began. 1.1490 was a swing low last week.

More: Is the US economy peaking out? Too many indicators are going in the wrong direction

Author

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.

GBP/USD surrenders some gains, back to 1.3420

GBP/USD holds on to moderate gains above 1.3400 the figure on Friday. Optimism surrounding the UK government’s leadership transition and expectations of further BoE tightening support the British Pound, while easing tensions in the Middle East and fading Fed rate-hike expectations weigh on the US Dollar.

EUR/USD turns positive, targets 1.1450

EUR/USD now picks up pace and advances toward the 1.1440 region on Friday, up modestly for the day. With no major economic data due, lingering uncertainty over the US-Iran conflict keeps investors cautious, limiting the pair's upside.

Gold remains offered, still below $4,100

Gold struggles to extend Thursday’s rebound and navigates below the $4,100 mark per troy ounce on Friday. Uncertainty surrounding the Middle East conflict limits the precious metal’s upside, which is also under pressure amid rising US Treasury yields across the curve.

Week ahead – US CPI and Warsh testimony to take centre stage, BoC eyed too

US inflation report and Warsh testimony to headline the week. Dollar to dominate amid slew of other US data and Mideast tensions. Amid fresh Iran escalation, China GDP to shed light on Q2 impact. Bank of Canada not expected to follow RBNZ with rate hike.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June Federal Open Market Committee meeting landed mid-round-trip, describing a world that had already stopped existing.

Five sessions, one round trip: Why the whipsaw is exactly what Warsh ordered

Markets opened July with a December hike as the base case and spent five trading sessions unlearning and relearning it. A 57K payrolls print bled the tightening bets out of the strip; a re-shut Strait of Hormuz is pushing them back in. Wednesday's minutes from the June FOMC meeting landed mid-round-trip, describing a world that had already stopped existing.