EUR/USD Weekly Forecast 21 Aug 17 1



Good day forex traders.

Welcome to our weekly review of the popular currency pair.

In the previous EUR/USD review we noted that the currency pair continued the to test the 1.18 region. This is usually a strong area of influence and hence a consolidation is not surprising.

Looking at the EUR/USD weekly chart above, we note that a consolidation is underway at the 1.18 region.

This is the midway between two major consolidation regions. It is difficult to assume a trend on either sides. Having said so, a report on retail investors indicate the majority are invested in a bearish outcome.

A Bloomberg report shed some light on the recent Euro weakness ”

European Central Bank officials sounded the alarm at the threat of an even stronger euro, as the currency’s gains to the highest since they unveiled quantitative easing in 2015 cloud efforts to revive inflation.

“While it was remarked that the appreciation of the euro to date could be seen in part as reflecting changes in relative fundamentals in the euro area vis-a-vis the rest of the world, concerns were expressed about the risk of the exchange-rate overshooting in the future,” an account of the July 19-20 policy meeting published by the ECB showed on Thursday.
The single currency fell more than a quarter of a cent after the report, before rebounding to trade at $1.1737 at 4:51 p.m. Frankfurt time. That’s down 0.3 percent on the day. It has gained 11 percent against the dollar this year and 5 percent on a trade-weighted basis as an economic recovery spreads through the 19-nation region. The currency this month reached its highest level against the dollar since January 2015.

“I see the ECB’s turn of phrase as a wish to prevent any further appreciation of the euro,” said Kristian Toedtmann, an economist at DekaBank in Frankfurt. “If the appreciation should continue, that would be a factor that would hinder the ECB in its normalization and force it to adopt a slower pace.”

A too-strong euro would undermine efforts to restore price stability in the euro area, highlighting the challenge policy makers face as they prepare to discuss a gradual exit from monetary stimulus. While economic growth is proving to be robust and increasingly broadly spread, inflation remains significantly below the ECB’s goal. ”

Long time readers will remember our caution on the perils of ignoring sentiments. Statements made by central bank officials often pass on a temporary influence on the concerned currency.

Never forget your proper money management. Trade safely.

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