Forex Forecast: 04 – 08/05/2020
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 for this week a consolidation on the EURUSD between 1.1147 and 1.0636 and to go short above 1.09 and long below or at 1.036. Throughout this week, it seems that the EURUSD is consolidating its price at around 1.0849. The EURUSD high for this week was 1.0890 and low was at 1.0808. Hence, there was not a long or short position opportunity, according to the previous technical indicators that trigger a long or short trading position.
The dollar’s decline came ahead of London’s fix, with no specific catalyst behind it. The macroeconomic calendar was packed and included an ECB monetary policy announcement. The central bank made minor twists to its current policy, as it left rates unchanged while easing TLTRO conditions, by reducing interest rates between June 2020 and June 2021. It also announced a new lending program, meant to support the economy through the pandemic.
President Lagarde acknowledged the EU is going an unprecedented contraction and that the Union’s GDP may fall between 5%-12% this year. Ahead of the decision, the preliminary estimate of the EU Q1 GDP came in at -3.3%, the lowest on record.
As for the US, weekly jobless claims in the week ended April 24 resulted in 3839K, worse than expected. Personal income fell by 2.0% in March, while spending plunged 7.5%. Core PCE inflation printed at 1.7%, below the previous 1.8% but above the 1.6% expected.
This Friday, most countries will celebrate Labour Day, although not the US. The country will release the final version of the April Markit Manufacturing PMI, foreseen unchanged at 36.9. The official ISM manufacturing index is expected at 35, below the previous 37.4.
What to look for around EUR
The euro extends the recovery from recent lows and is now shifting its focus to the 1.0900 region. As always, developments from the coronavirus and its impact on the economy are expected to keep ruling the sentiment in the global markets for the time being, while optimism on a gradual re-start of the economic activity in some members of the bloc has given extra oxygen to the single currency as of late. On the more macro view, the euro is expected to remain under scrutiny in light of the predicted contraction of the bloc’s economy in the first half of the year, relegating hopes of a potential recovery to Q3 and/or Q4.
The EURUSD pair is down for a second consecutive week, having bottomed at 1.0726, this past Friday. The coronavirus pandemic remains as the main market motor, keeping the mood depressed, as there’s no light at the end of the tunnel just yet.
EURUSD is indeed being pressured by devastating data, ahead of the ECB. Currently, the EURUSD is trading above 1.0850 as tension is mounting toward the critical ECB decision with changes to the bond-buying scheme eyed. Euro-zone GDP drop by 3.8% quarterly in the first quarter, worse than expected. Other figures also missed projections.
The selling bias is now dominating the sentiment around the shared currency and forces EURUSD to shed further ground and flirt with the 200-hour SMA in the 1.0830 region.
EURUSD levels to watch
At the moment, the pair is losing 0.18% at 1.0851 and faces immediate contention at 1.0814 (78.6% Fibo of the 2017-2018 rally) seconded by 1.0727 (weekly low Apr.24) and finally 1.0635 (2020 low Mar.23). On the flip side, a break above 1.0944 (55-day SMA) would target 1.0990 (weekly/monthly high Apr.15) en route to 1.1034 (200-day SMA).
For next week, our technical indicators suggest initiating a long position on the EURUSD at or below 1.0825. A perfect long position entry price would be around 1.0820, and selling it at or above 1.08588, even though breaking above it, means it can go up above 1.09 as the following technical indicator chart suggests.
EUR to USD forecast for tomorrow
Euro to Dollar forecast on Friday, May, 1: exchange rate 1.1030 Dollars, maximum 1.1195, minimum 1.0865. EUR to USD forecast on Monday, May, 4: exchange rate 1.1085 Dollars, maximum 1.1251, minimum 1.0919. Euro to Dollar forecast on Tuesday, May, 5: exchange rate 1.1079 Dollars, maximum 1.1245, minimum 1.0913. EUR to USD forecast on Wednesday, May, 6: exchange rate 1.1083 Dollars, maximum 1.1249, minimum 1.0917.
In 1 week, Euro to Dollar forecast on Thursday, May, 7: exchange rate 1.0931 Dollars, maximum 1.1095, minimum 1.0767. EUR to USD forecast on Friday, May, 8: exchange rate 1.0898 Dollars, maximum 1.1061, minimum 1.0735. Euro to Dollar forecast on Monday, May, 11: exchange rate 1.0890 Dollars, maximum 1.1053, minimum 1.0727. EUR to USD forecast on Tuesday, May, 12: exchange rate 1.0880 Dollars, maximum 1.1043, minimum 1.0717. Euro to Dollar forecast on Wednesday, May, 13: exchange rate 1.0900 Dollars, maximum 1.1064, minimum 1.0737.
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.