Good day forex traders.
Welcome to our weekly review of the EUR/USD currency pair. How was your trading performance? Hope you made some pips.
In our previous reviews we noted on a currency pair that is testing the upside resistances. Long term readers will know that often if the resistance remains unbroken, the EUR/USD will likely turn.
Looking at the daily chart of the EUR/USD, we note that it had purged from the heights of 1.09. In the previous EUR/USD forecast we warned of the possibility of a double top in the weekly chart and it looks like it is in play.
Further bearish momentum will need to overcome the support of 1.06 which happens to be the region of the lower bollinger band of the daily chart.
Around the markets, traders are speaking of a fizzle to the bullish run. Pound Sterling Live reports ”
The Euro’s rally came to an end last Friday after Eurozone inflation date came out below expectations and the previous print.
Headline inflation, which includes volatile Food and Fuel components, slowed to 1.5% in March compared to the 2.0% registered in the previous month.
The more important Core Inflation gauge meanwhile fell to 0.7% from 0.9% – a devastating blow to those who may have thought prices were once again starting to pick up backed up by greater growth in the region.
The data indicates the European Central Bank (ECB) is unlikely now to reduce its money-printing QE programme sooner than scheduled and that interest rates will stay low for a goodly long period of time.
Both these outcomes put pressure on the Euro as low interest rates attract less inflows from yield-hungry international investors and QE increases the supply of euros in the system.
The Dollar did not have an excellent week itself, also witnessing weak data on Friday in the form of slowing income and consumption numbers but whilst the
Eurozone data undermined an improving outlook for monetary policy, the US data failed to dent expectations that the Federal Reserve will continue raising interest rates at a similar pace to the current rate.
“Nonetheless, the dollar’s value against other currencies tends to be driven by expectations for the relative stances of monetary policy in the US and elsewhere, not their prevailing stances. And our view remains that the Fed will tighten policy by more than investors are anticipating, while other major central banks keep policy about as loose, or looser, than discounted in the markets,” said Capital Economics’, John Higgins.
With this in mind it is possible to conclude that the tide may now have turned back in favour of the Dollar, at least in the case of the EUR/USD pair, as the two monetary policies diverge even more widely than before. ”
In the week ahead, we are expected a mountain of economic data including the US Non-Farm Payroll. Employment figures exert a huge amount of influence on market sentiments. Be careful of unexpected developments and always practice proper money management.