Good day forex traders and readers.
Welcome to another EUR/USD forecast and I hope you had a good week of forex trading!
In the previous EUR/USD forecast we noted that if there was bullish momentum, there might be a test of the 1.3380 resistance. Fundamentally the US continues to show indications of improvement economically. Having said so the world bank cut the growth forecast for the global economy.
Looking at the EUR/USD daily chart above we note that the currency pair did test the resistance of 1.3380 as mentioned.
The currency pair had since eased off and should it continue, we might be looking at 1.3240 next.
If the bullish momentum returns, we would be looking at 1.3380 followed by 1.3480.
As the equities try to gain their footing from the ongoing sell off caused by apprehension, the currencies are facing similar pressure too.
The US Federal Reserve federal funds rate and FOMC statement is due next week and there is apprehension regarding the topic of reducing quantitative easing. Many experts believe that the current economic rally experienced by the US is a result of the quantitative easing program and any attempts to reduce it may result in a negative sell off. This is the reason why the global markets in general are reacting this way ever since the US Federal Reserve chairman Ben Bernanke gave suggestions of possible reduction in QE.
Nonetheless the data from the US remains encouraging as fundamental indicators such as retail sales are performing better than expected. I expect that we may see continued bullish momentum if the apprehension from the QE reduction gets resolved hawkishly.
In additional there is growing consensus among economists that the worst is over the euro zone as there is no longer any immediate threat of a euro zone break up or any sovereign default for now.