Good day forex traders.
It is time for our weekly review of the EUR/USD. It may be the holiday season but the forex koala is still in the house!
In the previous EUR/USD forecast we noted that the currency pair was bearish for the week. 1.14 remained a strong resistance. With the currency pair still below the middle bollinger band, we would need to be mindful of possible bearish price action. 1.14 would be a level to watch out for as an immediate bullish target.
Looking at the EUR/USD weekly chart above we note that the currency pair is slightly bullish for the week. It did test the 1.14 level as expected. The bollinger bands continue to impress as the middle bollinger band proved to be a strong resistance.
With the EUR/USD still below the middle bollinger band, we cannot discount the possibility of further bearish momentum. 1.14 will once again be the immediate target for any bullish momentum. Resistance may be encountered there too. Any bearish resumption will probably target 1.12.
European Central Bank Holds For Now
ECB President Draghi noted on the economic risks that are moving to the downside. The december meeting saw the ECB downgrading the growth and inflation forecasts. Having said so it remains confident on future developments. Analysts believe that the ECB is likely to put tightening plans on hold till the end of 2019. There are many facets of uncertainty such as a hard Brexit, France recession and an Italian budget crisis. US President Trump’s protectionism stance will likely be a source of concern too as economic deals may be affected. Investors usually rewards a currency with high interest rate and hence a hold may dampen demand.
We are heading towards a likely fact that the exit of the United Kingdom will be of one without deals. This will probably hit both the UK and the European Union hard. Economies will be affected and by extension the euro currency.
US Yields Concern
Risk aversion swamps the market as traders are concerned about an inverted yield curve. An inverted yield curve is often seen as a sign of recession and it last happened in June 2007. This is a situation where a rise in short term interest rates is accompanied by falling long term yields.
Crude Oil Woes
Crude oil prices were knocked down hard for the week and may extend it’s influence to the EUR/USD pair as a damper for risk appetite. At the moment it has affected the commodities currencies such as the Australian and Canadian dollars. Members can log in to their dashboard for the latest Weekly Majors analysis to see the effect standing out among the other currency pairs.
In view of the upcoming holidays, it is likely to be a low volume market. Having said so there are still economic data due to be released such as the German Prelim CPI and US CB Consumer Confidence. Consumer confidence influences retail sales and hence the importance of the data. In view of the uncertainty and low volume, staying out of the market may be a prudent choice at times.