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EUR/USD Weekly Forecast 26 Oct 15

Good day forex traders.

This week saw a great price action for the EUR/USD. I hope you were on the right side of the trade 🙂

In the previous EUR/USD forecast we noted that the currency pair ended slightly lower than the previous week. It tested the upper bollinger band as expected. I mentioned that I was extremely pleased with the performance of our bollinger bands. 1.14 and the upper bollinger band would probably be our immediate resistance. A bearish pushback would likely target the middle bollinger band at 1.12. From a fundamental point of view, I cautioned on the upcoming European Central Bank event. Sentiments could change resulting in a shift in expectations.

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Technical Analysis

Looking at the EUR/USD weekly chart above we note that the currency pair was bearish for the week. It stopped before the lower bollinger band, validating the usefulness of our bollinger bands technical approach.

We have shifted to the lower half of the bollinger band channel and hence we need to adjust our support and resistance levels. The immediate support is now likely to be 1.09 followed by 1.08. A bullish recovery will need to achieve the support turned resistance region of 1.12 followed by 1.14 again.



Fundamental Analysis

Our call for caution was spot on. The European Central Bank president mentioned that unless the Euro Zone economy picks up significantly, December may see additional stimulus added in the form of quantitative easing.

Long time readers will know that I always mentioned that such a dovish development will likely impact the sentiments significantly and indeed it happened. Traders sold the euro in a knee jerk reaction to the comment. Quantitative easing results in additional supply of money and hence an over supply pressure to the value of the currency.

As the market settles from this major development, I would advise prudence. Observation of the price action in the early part of the week may give us some clues to the direction. Furthermore with the high impact events due next week such as the German ifo business climate and FOMC meeting, proper money management is a must due to the high level of uncertainty.

Trade safely.

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