EUR/USD Forecast: the Fed will likely hike, but that does not longer mean dollar's strength

Having been under pressure for most of the week, the EUR/USD pair managed to close it above the 1.0900 level, trimming half of its losses amid another round of soft US data released on Friday. The pair peaked at 1.1020 at the beginning of the week, following the confirmation that Macron's will become the next French president after the second round of elections, but there was kind of "buy the rumor, sell the fact" afterwards that put the common currency under selling pressure.

The macroeconomic calendar was quite scarce, but none of the less, the greenback advanced, as with easing political woes in Europe, focus shifted back to the US and the Fed. Odds for a Fed hike next June are currently above 80%, after a couple of Fed's speakers hit the wires these days, warning of the risk of overheating the economy if rates remain low. Low volumes have kept majors within their previous weeks' range, while the dollar got a fresh impulse on Thursday, as weekly unemployment claims fell to their lowest in 28 years, and the PPI rose beyond expected. Further weighing on the EUR was stubborn Draghi, who reaffirmed that is no time to think of tapering stimulus.

US inflation released this Friday was worse-than-expected, and while is not a game changer for the Fed, it actually was for the greenback, sending it sharply lower across the board. Somehow, the movement indicates a) that a rate hike is pretty much priced in, and b) that confidence in whatever reform Trump will bring continues fading. Bottom line, despite retaining part of its gains, the future does not look that bright for the USD at this point.

From a technical point of view, the EUR/USD pair has settled a few pips below the 61.8% retracement of the post US-election slump around 1.0930, but in the daily chart, technical indicators have managed to recover from negative territory, now heading higher around their mid-lines, whilst the price is back above a bullish 20 DMA after a brief slide below it. In the weekly chart, the pair was unable to surpass its 100 SMA for a second consecutive week, but remains nearby, far above a bullish 20 SMA and with technical indicators easing within positive territory, indicating that the 1.1000 region remains critical when it comes to trend definitions, as only above it the pair can resume its advance, with the next resistances then at 1.1045, 1.1080 and 1.1160.

There are not so strong supports at 1.0890 and 1.0850, with the most relevant one being 1.0820, the 50% retracement of the mentioned decline and the lowest since the first round of French elections. Below it, the pair will likely fill the weekly opening gap left back then around 1.0730.

Sentiment towards the EUR/USD pair is barely bullish in the short term, as the FXStreet forecast poll shows that 45% bet for an advance, but 44% expect the pair to remain range bound. In a one month view, bears account for 58%, well below previous 71%, somehow reflecting fading faith in the greenback. The 3-month average target is now 1.0773, higher than previous 1.0719.

Updated May 12, 15:00 GMT                                                                                                               See Full Study

For the GBP/USD pair, seems a top has been confirmed near 1.3000, as from here on, bears lead the pair. In fact, as time goes by, the number of those betting for further slides increase to reach 75% in the longer view, with the pair seen then near 1.2500, weighed by a neutral BOE and tough pre-Brexit talks.


Updated May 12, 15:00 GMT                                                                                     See Full Study

Bulls lead the way in the USD/JPY pair, although by a small margin. The Japanese yen has been showing a particular behavior during these past few weeks, linked to US Treasury yields, and pretty much ignoring data or dollar's strength/weakness. Despite sentiment leans the scale towards the upside, the pair is hardly seen beyond 115.00.

Updated May 12, 15:00 GMT                                                                                                                  See Full Study 


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Monday, 14 October 2019

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