Forex Forecast: 03 – 07/08/2020
How to use the basic technical analysis concepts we have shared with you to predict the next week’s currency pair price movement
EURUSD Rates Week in Review
Last week, our technical indicators suggested to short the EURUSD at 1.1622 for a covering target price between 1.15-1.14. For longs, our technical indicators suggested an entry price between 1.15-1.14 for a selling target price of 1.20. Have we kept our entry price discipline, we did not have a long or short entry position opportunity, even though, once again, we got the EURUSD trend right. So far, this week the EURUSD high was set today at 1.1808, and the Low was set this past Monday at 1.1637.
Better than expected but still the worst in history, the US economy fell by 32.9% annualized in the second quarter, better than -34.1% estimated but well within the wide range of expectations.
In quarterly terms, the world’s largest economy squeezed by 9.5%, and that is better than Germany’s contraction of 10.1% recorded early in the day. Nevertheless, EUR/USD is rising.
Investors seem to look beyond the second quarter, which ended a month ago and focus on recent data. Europe is suffering several COVID-19 flare-ups but is returning to growth. That cannot be said about the US, where weekly jobless claims increased once again.
Initial applications rose to 1.434 million and continuing claims are up above 17 million, in the week when Non-Farm Payrolls surveys are held. Even if America gains jobs in July, the prospects are dim as the death toll from the disease is rising.
EURUSD has already topped the post-Fed high of 1.1806 and may be ready to extend its gains. New coronavirus figures from the US may weigh heavily on the dollar later in the day.
EURUSD trades around 1.18 after worrying US GDP claims hitting a new 22-month high after US GDP crashed by 32.9% annualized, better than expected, and continuing claims topped 17 million. Earlier, German GDP and inflation figures missed estimates.
As the above chart illustrates, despite the recent rally, the Relative Strength Index on the four-hour chart remains below the 70 level, outside over-bought conditions and allowing the currency pair to continue rising.
The next level to watch is 1.1820, a high point in September 2018. Beyond that point, euro/dollar would hit the highest since June 2018, a two-year peak. The next hurdles are 1.1850 and then only the psychologically significant 1.20, but that would trigger overbought conditions if it happens too fast.
Momentum remains to the upside and EUR/USD holds above the 50, 100, and 200 Simple Moving Averages.
Support awaits at 1.1780, 1.1750, and 1.17.
For next week and as shown in the following daily chart of EURUSD, it seems obvious that the price has a higher probability of moving down than to continue the upward movement. Why? Because the price reached the upper line of the price channel. Mainly, this zone gives a reversal with the further pullback to the mainline of the price channel. In this case, the upper line is supported by 1.18000 round number, which acts as resistance by default. RSI reached the overbought zone, and it will give us a solid reversal signal. MACD histogram is going to support a downward movement. Hence, our technical indicators suggest shorting the EURUSD at 1.18 for a covering target price 1.17859.
EUR to USD forecast for tomorrow, Euro to Dollar forecast on Friday, July, 31: exchange rate 1.1825 Dollars, maximum 1.2002, minimum 1.1648. EUR to USD forecast on Monday, August, 3: exchange rate 1.1810 Dollars, maximum 1.1987, minimum 1.1633. Euro to Dollar forecast on Tuesday, August, 4: exchange rate 1.1925 Dollars, maximum 1.2104, minimum 1.1746. EUR to USD forecast on Wednesday, August, 5: exchange rate 1.1940 Dollars, maximum 1.2119, minimum 1.1761.
In 1 week, Euro to Dollar forecast on Thursday, August, 6: exchange rate 1.1982 Dollars, maximum 1.2162, minimum 1.1802. EUR to USD forecast on Friday, August, 7: exchange rate 1.2029 Dollars, maximum 1.2209, minimum 1.1849. Euro to Dollar forecast on Monday, August, 10: exchange rate 1.2124 Dollars, maximum 1.2306, minimum 1.1942. EUR to USD forecast on Tuesday, August, 11: exchange rate 1.2143 Dollars, maximum 1.2325, minimum 1.1961. Euro to Dollar forecast on Wednesday, August, 12: exchange rate 1.2190 Dollars, maximum 1.2373, minimum 1.2007.
Disclosures: The material provided herein is for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any interests in the EUR/USD or any other securities. This overview may include or be based in part on projections, valuations, estimates and other financial data supplied by third parties, which has not been verified by Pedro Ferreira nor KeySoft. Any information regarding projected or estimated investment returns are estimates only and should not be considered indicative of the actual results that may be realized or predictive of the performance of the EUR/USD or any underlying security. Further, Pedro Ferreira is not long or short in the currency pair. Past investment results of any underlying managers should not be viewed as indicative of the future performance of the EUR/USD.