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EURUSD Forecast and Technical Overview

EURUSD Forecast and Technical Overview

The summary of the past week: A week of 90 pips as the result of Brexit optimism, not a self-strength.

Fundamental Analysis: 

USD ended the week lower against all of the major currencies on the back of softer economic data. DXY ended the week at 95.88.

After the mixed employment report released in the previous week, and weaker-than-expected US data released throughout the week. US CPI increased by 1.5% YoY in February, while the core reading printed 2.1%, below the previous estimate of 2.2%, slightly below the market’s expectations. Inflation at factory levels also increased by less-than-expected according to the PPI figures, while Durable Goods Orders were mixed, as the headline reading was better-than-expected, but the ex-transportation sub-component was a miss. And New Home Sales decreased by 6.9% in January vs. an expected 0.6% decline. Instead of improving, the Empire State Manufacturing Index dropped to a 22-month low in March while industrial production grew less than expected. The University of Michigan Consumer Sentiment index increased but the improvement also fell short of expectations.

In response, Treasury yields turned lower and the dollar headed south.

Things in the EU were not much better, although there were not many relevant releases. German inflation was also softer-than-expected up by just 1.5% YoY. Eurozone Data is still not promising. 

EURUSD  gains were the result of Brexit optimism, as  GBP rally added pressure on USD. Nevertheless, investors can’t find a reason to go long in the EUR, leaving the pair confined to the range established in the previous week.

Slowing global economic growth, contradictory headlines related to the US-China trade war, and Brexit chaos, were behind the absence of a clear trend.

Money is looking for a place to go. One of the primary reasons why the dollar outperformed in the first quarter is relative weakness abroad but as some big uncertainties subside, money could flow back into riskier currencies and riskier assets.

GBP: The UK still doesn’t have a Brexit deal but at least we know that they won’t be spinning-out without an agreement.

CHINA: Slower growth in China has been a big problem for the rest of the world but tax cuts could provide a big boost to the economy.

The prospect of improvements could make other investments more attractive, easing demand for US dollars even as the US economy outperforms. However, in the long term,  demand for USD  should remain strong as the Fed continues to be the only major central bank to raise interest rates this year. ( BoE may join FED depending on Brexit )

We have an interesting week ahead: The FED and BOE Interest Rate Decision and Monetary Policy Statement.

Some analysts believe that “low inflation” will lead FED to take more Dovish stance. However, the latest comments of FED members was putting it straight. ” Inflation would not be the FED’s main concern anymore ”

The FED  isn’t expected to make fundamental changes to its monetary policy, with attention shifting to the dot-plot and any revision to future rate moves. Market players believe that at least one rate hike is still in the docket for this year. More relevant the Fed will offer new forecasts on inflation and growth, following the December update. Back then, the central bank reduced chances of rate hikes from three to two, but ever since then, the dovish ‘patient’ stance has dented hopes of such happening.

On the Euro Side: The most relevant macroeconomic data will be the German ZEW survey, expected to show that Economic Sentiment deteriorated further in the Union, and preliminary March Consumer Confidence. By the end of the week, preliminary Markit PMI for both economies will be out. EU numbers posted a modest bounce in February, but not enough to spoke the ghost of slowing economic growth. As long as Eurozone data remains unpromising with all aspects, the EUR has no chances of posting solid gains against USD.

Summary: We are talking about EURO vs USD. There are two legs of this equation. On the one side, there is FED continues to be the only major central bank to raise interest rates this year. On the other side, there is a slowing down economy and continuous unpromising macroeconomic figures. Under the current macroeconomic fundamental conditions, EURUSD can not have a sustainable ” bullish ” move. All temporary bullish moves will be used as a selling opportunity by the investors.

Technically:

I will not add any indicators on to the chart. The picture and the levels are clear enough. The pair has been trading in a descending channel for two months.

On the upside, the key resistance resides at 1.13600. A firm break and close above 1.13600 would send the pair 1.14200 and 1.14800.

The pair has attempted several times to break above 1.13300, although it failed to sustain gains above it. In the weekly chart, the price is now just below a directionless 200 SMA, while the 20 and 100 SMA remain above the larger one.

We can say that EURUSD is in a ” No Trade Zone” as the technical indicators in the mentioned chart offer a neutral stance, heading nowhere right below their midlines, with the risk still skewed to the downside in the longer run.

On the downside, the levels that Bulls will try to defend are 1.12900 and 1.12600. Breakout of 1.12600 will trigger the bearish move.

On the smaller charts,   a bearish Butterfly Pattern is in action.  – Area of the entry 1.1344-1.13520-  The pattern has reached its structural targets.

EURUSD Bearish Butterfly Pattern

Our trading strategy is to sell the bullish attempts towards 1.13600.  We have published a triangle pattern on Friday and we plan to add short at the breakout of the triangle 1.12900.

Closing above 1.13600 can be used as a buying opportunity with the targets 1.14200 and 1.14800 shorter-term.

We will publish the fresh trade setups for the members as soon as they appear on the charts.

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DISCLAIMER: This is a technical analysis study, not advice or recommendation to invest money

EURUSD:  Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility

 

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