Good day forex traders and readers.
Welcome to another EUR/USD forecast as we head on to midweek. I hope you are having success with your forex trading so far as nothing beats having a harvest of pips 🙂
In the previous EUR/USD forecast we noted that the currency pair could test the support of 1.2720. Having said so the weekly bollinger band bottom support which functioned strongly previously is in the region and hence any bearish push could face a tough support.
Fundamentally, the continued accommodative support from the European Central Bank would probably weight down on the value of the euro.
Looking at the EUR/USD daily chart above we note that the currency pair did received bearish pressure and went as low as 1.2750+. It has since eased off and is above 1.28.
I mentioned previously that this region is crucial as the weekly bollinger band served as a strong support on a number of occasions in the past. Therefore should the support fail, we might be looking at an extended bearish trend. 1.2720 is probably a critical support to observe.
Any bullish correction would need to overwhelm the resistance of 1.2880 / 1.2940 and 1.3.
S&P downgraded the ratings of Italy and this probably inflicted a hit on the sentiments towards the Euro Zone. As of now, the region still suffers from various fundamental issues such as high unemployment in countries like Spain or political uneasiness in countries like Portugal.
The US Federal Reserve unlike the European Central Bank has indicated on it’s considerations towards tapering quantitative easing. This often has an effect of tightening monetary supply thus potentially raising the value of the US dollar. The European Central Bank on the other hand remains accommodative in it’s monetary policy in a bid to support the economy of the Euro Zone. Basic economics dictates that excess supply would lower value. Furthermore the European Central Bank president had commented on the willingness to cut interest rates further in order to promote growth.