Good day forex traders and readers.
Welcome to our weekly forecast of the EUR/USD. As we seem to be entering a region of consolidation, caution is advised.
In the previous EUR/USD forecast we noted that the currency pair did indeed face a strong bearish pressure upon dipping below the region. It went on to test 1.24 as expected and managed to push beyond 1.24 for some time.
The push beyond 1.24 might indicate underlying bearish pressure. We had to observe the price action as the closer the EUR/USD approached 1.2, the possibility of a strong bullish correction would increase.
Looking at the EUR/USD weekly chart above we note that the currency pair bounced up from the previous low and is now resting in the 1.25 region. Indeed as per our caution, bullish corrective pressure was felt.
As of now, it is too early to ascertain if this is a long term bullish correction or just a minor pullback. A few readers mentioned that they were caught. I have to caution again that such movements are not unexpected and hence a forex trader must always have proper money management. Currency pairs do not move in a straight line.
I will be observing closely the price action for clues of the current situation. The immediate resistance is likely to be 1.26 while support is 1.24.
An emerging theme for the woes of the Euro Zone is the membership of the United Kingdom. Disagreements regarding policies are driving the UK to a stay or leave the euro zone resolution. Being one of the strong economies of the euro area. Many investors are feeling apprehension.
As always I want to continue to remind everyone to be mindful of the fundamental currents. The euro zone is on the edge of a stimulative program by the European Central Bank to shore up the economy and it is likely to weaken the currency. On the other end, the US Federal Reserve looks set to continue tightening the monetary conditions.
Another point to note is that gold is below it’s crucial level of $1200 for now and since the U.S. Dollar is usually inversely correlated, this may indicate further US dollar strength.
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