Good day readers.
Welcome to our weekly review of the EUR/USD. I hope trading was good for the week.
In the previous EUR/USD forecast we noted that the currency pair remained confined in the pivot region of 1.12. Having said so, caution was advised as the narrowing range might result in a technical breakout. The US Non-Farm Payroll while not as good as expected, remained within acceptable range.
From a technical point of view we noted a breakout on the weekly chart. This was expected and I hope that no one was caught on the wrong side of the trade. It is critical that we always have proper money management and hence set viable stop losses and take profits.
Looking at the current situation, the currency pair may need to settle down before a clear momentum is observed. We are at the important support and resistance region of 1.1.
From a fundamental point of view the recent US Federal Reserve minutes suggested that an interest rate hike would come soon. As BBC reported , ” Minutes of the 20-21 September meeting showed policymakers were nearer to raising rates than at any time since last December.
They only held off because inflation was still running below their 2% target and there was no sign of rising wage pressure.
Rates were kept between 0.25% and 0.5%.
It lends further weight to the expectation of an interest rate rise by the end of the year.
According to the minutes, “several members judged that it would be appropriate to increase the target range for the federal funds rate relatively soon if economic developments unfolded about as expected.”
They also said “it was noted that a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labour market and inflation”.”
Due to the expectations of an interest rate soon, demand for the US dollar probably increased.
Another topic this week was that the U.S. Deficit is up for the first time since 2009 on a spending spurge. While spending stimulates the economy, one must be mindful of the debt pressures it brings considering the US situation.
The upcoming week features the European Central Bank minimum bid rate. There are a number of investors who are concerned about further easing. Do trade safely.