Good day forex traders.
Welcome to our weekly forecast for the EUR/USD.
In the previous EUR/USD forecast we noted that the 1.16 region would be a significant support. It remained to be seen if the head and shoulders technical pattern would materialise.
The non commitment of the European Central Bank to interest rate hikes probably dampened the demand for the euro.
The EUR/USD is currently consolidating and testing the region of 1.16.
As the focus for our forecasts is the medium to long term, it is important to know that we view movement on the shorter time frames as “noise”. We are awaiting for a clean break to the downside away from 1.16 before expecting a possible run down to 1.04 / 1.05.
In the equities market, it is believed by numerous analysts that the trade wars by President Trump are causing a depression of prices. As far as the currencies market is concerned, the US dollar may strengthen riding on the wave of renewed US protectionism.
There is an interesting report from Bloomberg on how Euro Zone developments are moving the US dollar more than the US itself, “ The dollar is ebbing and flowing more to developments across the Atlantic than to domestic forces, Bank of America Merrill Lynch strategists say.
They cite several examples this year where movements in the U.S. currency appear to have been powered overwhelmingly by weakness in the euro rather than by news from within its own borders. They view the dollar’s rally on the heels of this month’s dovish European Central Bank meeting, the boost it got from Italy risks at the end of May, while highlighting its virtual non-reaction to the hawkish Fed meeting, as illustrating their point.
“FX correlations with data this year confirm that it takes the EUR to move the USD,” strategists led by Athanasios Vamvakidis wrote in a recent note.“
We have important economic data such as the US final GDP this week. A strong release may spur further demand for the US dollar. Always practice proper money management.