Good day forex traders and readers.
Welcome to our popular weekly forecast of the EUR/USD. We have been doing this since 2008 and it has been a wonderful journey!
In the previous EUR/USD forecast we noted that the range was tighter than usual. The extended bullish target of 1.1 was in sight. We noted that the bottom bollinger band was turning flat and hence we need to monitor closely. This region might become an area of consolidation or even turn bullish.
Looking at the EUR/USD weekly chart above we note that the currency pair did turn bullish as expected. In fact it was a forex spike. The extended bullish target of 1.11 was achieved and a number of readers wrote it about their successes. Well done and just do remember your proper money management as nothing in forex is 100% !
We can see above that the EUR/USD is testing the middle bollinger band which happens to be the 1.12 region too. I am inclined to believe that some resistance may exist but on the other hand this bullish run up was quite intense. This calls for close monitoring of the price action.
Further bullish momentum will probably seek 1.14 while bearish recovery is likely to test the resistance turned support of 1.11 followed by 1.10.
In the AUD/USD forecast I mentioned that while the US Federal Reserve kept interest rate at a record low, the calendar based reference to an upcoming interest rate hike was dropped. This brought apprehension or excitement to the markets, depending on which sector we are referring to as an absence of calendar time frame indicates a possibility of an interest rate hike anytime. For investors, many are concerned of an end to cheap money. This will affect general sentiments in the U.S. On the opposite spectrum, currency traders are thrilled as an interest rate hike will likely give a boost to the value of the U.S. Dollar.
The talk I am hearing from the ground is that the spike may be due to the unwinding of US dollar loan positions in anticipation of rising interest rate. With the end of cheap money potentially near, investors are exiting positions so that they need not manage a higher interest rate loan of the U.S. Dollar. If this is true, this spike may be temporary and not a start of a bullish trend. Only time can tell.
Many important economic data releases are due this week, including the US Non-Farm Payroll. Do trade safely and be ready for any unexpected developments.
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