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EUR/USD Weekly Forecast 20 Mar 17

Good day forex traders.

Was the week a good one? I sure hope so. Do remember that even a pip gain is better than a loss. Proper money management is crucial to the viability of forex trading.

In the previous EUR/USD review, we noted that the currency pair was experiencing upside pressure. With the expected interest rate hike, close monitoring would be required.

Looking at the EUR/USD weekly chart above, we observe continued high side pressure for the currency pair.  1.08 remains a significant resistance region.

From a technical point of view, a double top chart formation may be developing. If indeed, a bearish reversal is likely.

The US Federal Reserve increased the interest rate as expected. BBC reports ”

The US Federal Reserve has raised its benchmark interest rate by 0.25% for only the third time in a decade. The central bank voted to raise its key rate target to a range of 0.75% to 1%.

The Fed had been expected to raise rates after a robust February jobs report, solid pay gains, rising inflation and a dip in the unemployment rate to 4.7%. Federal Reserve policymakers are expected to increase rates a total of three times this year.

The Fed aims to keep the cost of lending between banks within a specified band, which it does by buying or selling financial assets. It is raising that band by a quarter of a percent.

Fed Chair Janet Yellen said the committee judged that a “modest increase” in the rate was appropriate “in light of the economy’s solid progress.” “Even after this increase, monetary policy remains accommodative, thus supporting some further strengthening in the job market, and a sustained return to 2% inflation,” she added. ”

While we would expect that the demand for US dollar increase, the EUR/USD gained instead. This may be due to a development that may be likely to have been missed out. Bloomberg reports ”

Dollar Falls to Lowest Since November on Weak Inflation Outlook.

The dollar headed for its biggest weekly loss since July after a measure of U.S. inflation expectations dropped to a record low.

The Bloomberg dollar spot index touched its lowest since Nov. 11 after a University of Michigan survey showed long-term inflation expectations dropping to a record. The greenback added to declines seen after the Federal Reserve disappointed traders this week with its failure to make more aggressive forecasts for rate increases. Easing political risk in Europe also doesn’t bode well for the dollar, Morgan Stanley said. ”

With the possibility of a gradual interest rate hike by the US Federal Reserve priced into the markets, it is likely that an aggressive schedule may be required to spur US dollar demand.

Unemployment claims in the US is expected this week. We will need to monitor the development as employment is a crucial component of an economy’s health.

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