Forex Guides

EUR/USD Weekly Forecast 14 Oct 17

Good day forex traders.

Welcome to our weekly review of the EUR/USD currency pair.

In the previous forecast we noted that the currency pair was experiencing an easing of the bullish pressure. Sentiments were also reflecting an increase in interest towards the US dollar.

Looking at the EUR/USD weekly chart above we observe that the currency pair remains under the previous bullish trend line which lasted months.

As per our previous review, it continues to ease and consolidate around the region of 1.18. If the bearish pressure increases, the middle bollinger band which happens to be at the technical support of 1.16 is likely to be a strong support.

A bullish recovery will need to target and overcome the resistance of 1.2.

In a Sunday event, the US Federal Reserve chair spoke on the US economy. Bloomberg reports ”

Federal Reserve Chair Janet Yellen said that the U.S. central bank expects to continue to raise interest rates gradually as solid growth, a strong labor market and a healthy global economy lift prices even as she recognized that inflation has been surprisingly low. 

“My best guess is that these soft readings will not persist, and with the ongoing strengthening of labor markets, I expect inflation to move higher next year,” Yellen said Sunday in the text of a speech prepared for delivery at the Group of Thirty’s Annual International Banking Seminar in Washington.

Yellen’s term expires in February and she is said to be among the candidates President Donald Trump is considering to be his pick to lead the central bank. She has presided over a sustained recovery from the global financial crisis, though inflation has remained below the Fed’s 2 percent goal, a development that’s puzzled policy makers at a time when the unemployment rate has fallen past its pre-crisis low.

“The biggest surprise in the U.S. economy this year has been inflation,” Yellen said. While the Fed Chair expects a pickup, she and her colleagues “recognize that this year’s low inflation could reflect something more persistent than is reflected in our baseline projections.”

Inflation came in at 1.3 percent in August after stripping out volatile food and fuel, well below the Fed’s goal. It has been headed in the wrong direction for months, and data through the end of the year will be unreliable, muddied by seasonal adjustment issues and price fluctuations wrought by hurricanes that hit the U.S. South late this summer.

Employment, meanwhile, has surpassed officials’ expectations. The U.S. jobless rate has fallen to 4.2 percent, its lowest level since 2001, and the participation rate has shown stabilization as Americans come back into the workforce. Wages have been slow to accelerate, but show early signs of life. ”

Without doubt, investors will be speculating on the intent of the speech. It is unlikely to add negative sentiment towards the US dollar as the perceived outlook remains similar which is a gradual raise in interest rate.

We have the European Central Bank president speaking this coming week. It is important that we monitor developments. As the EUR/USD is consolidating, stacking trades excessively on either sides of the currency pair is highly unrecommended.

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