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EUR/USD Forecast January 13

Good day forex traders and readers.

Welcome to another weekly forecast of the popular EUR/USD. I hope you have been trading well since the start of the new year!

In the previous EUR/USD forecast we noted that the currency pair unexpectedly dip as per my warnings. Despite having good economic data released from the Euro Zone, the EUR/USD dipped probably as a result of low volume and liquidity conditions. 1.36 should be observed.


Technical Analysis

Looking at the EUR/USD daily chart above we note that the currency pair gained a fair bit during the last trading day of the week having remained somewhat bearish for the initial part of the week.

The currency pair is now testing the immediate resistance of 1.3680. If the bullish pressure manages to breach the resistance, the extended bullish target will probably be 1.38.

Should the bearish momentum return, we can expect possible immediate support at 1.36 followed by 1.3520.

Fundamental Analysis

I was reading a report and it fits what I am saying all this while. The EUR/USD is often a reflection of the economies of the US and the Euro Zone. Since the financial crisis of 2008, the central banks of both economics have been adopting rather different strategies. While the US Federal Reserve adopted a very accommodative approach in it’s bid to stabilize the economy, the European Central Bank was supportive of painful but corrective austerity measures. The report believes that the worst is over for the Euro Zone and acknowledges the role the current president of the European Central Bank, Draghi played in the recovery. Ireland is back in the market with its bonds and economists believe that Portugal and even Greece may follow soon after getting their budgets fixed.

The recent US Non-Farm Payroll came in worst than expected. Although the jobs created remain positive, it is much lower than expected. Although it may be due to the cold weather, the poor performance remains an impact to the market sentiments as speculation of performance and US Federal Reserve tapering intensifies. It is crucial to note that while the unemployment rate dropped a fair bit, it is due to more of a reduction of people in the employment pool rather than an massive increase in employment. Hence traders probably sold off US dollars in favor of the Euro Zone single currency.

We will need to monitor closely if the initial market reactions will continue come Monday. Trade safely.

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