Forex Forecast: 1 – 5 August 2022
EURUSD Rates Week in Review
Last week, our technical indicators suggested t to go Short at or above 1.01912, setting a Stop Loss at 1.03499, and to go Long at or below 1.01, setting a Stop Loss at 0.98.
This week, EURUSD price range was 1.0259 high, set this past Monday, and 1.0096 low, set yesterday, Wednesday. So, Monday, we could have short the currency pair at 1.0257, Covering it on an intraday trading at 1.0181, for 0.74% profit. Tuesday, we could have Short the currency pair at 1.0249, Covering it on an intraday trading at 1.0109 for 1.37% profit. Wednesday, we could have Short it at 1.0220, Covering it on an intraday trading at 1.0098, for 1.01% profit. Thursday, we could have Short it at 1.0233, Covering it on an intraday trading at 1.0152, for an extra 1.01% ROI.
Fundamental Overview
EURUSD has lost its bullish momentum after having gained nearly 100 pips in the late American session on Wednesday. The pair trades near the upper limit of its 10-day old range and needs to clear the 1.0230 level to continue to push higher.
Although the US Federal Reserve hiked its policy rate by 75 basis points (bps) to the range of 2.25-2.5% on Wednesday, the dollar faced heavy selling pressure. During the press conference, FOMC Chairman Jerome Powell said that they will not be offering any rate guidance from now on and added that they will adopt a “meeting-by-meeting” approach. Following these comments, the probability of one more 75 bps rate increase in September dropped to 30% from 47.3% a week ago.
Later in the day, the US Bureau of Economic Analysis will release its first estimate of the second quarter Gross Domestic Product (GDP) growth. The US economy is forecast to expand at an annualized rate of 0.4% following the first quarter’s 1.6% contraction.
According to the CME Group’s FedWatch Tool, markets are pricing in a 30% probability of one more 75 bps hike in September. With a stronger-than-expected GDP print, hawkish Fed bets could return and help the dollar regather its strength. On the other hand, EURUSD recovery could pick up steam in case the US economy fails to rebound. The US Department of Labor’s weekly Initial Jobless Claims data will also be featured in the US economic docket.
Meanwhile, the data from the euro area showed that the Consumer Confidence Index declined to -27 in July from -23.8 in June. Additionally, the Economic Sentiment Indicator fell to 99 from 103.5 in the same period.
Technical Analysis
EURUSD drops toward 1.0150 as dollar rebounds. The currency pair has declined below 1.0200 during the European trading hours on Thursday. The data from the euro area revealed a sharp drop in economic sentiment and business confidence in July. Investors await the second-quarter GDP growth data from the US.
The Fibonacci 38.2% retracement level of the latest downtrend forms strong resistance at 1.0230, which is also the upper limit of the 10-day-old trading range. With a four-hour close above that level, the pair could target 1.0300 (psychological level, Fibonacci 50% retracement) and 1.0320 (200-period SMA on the four-hour chart).
On the downside, 1.0200 (50-period SMA, psychological level) aligns as initial support before 1.0150 (Fibonacci 23.6% retracement, 100-period SMA) and 1.0100 (psychological level, static level).
For next week, EURUSD successfully maintained the 1.0 USD level. This is a significant psychological level! As per my Elliott Wave analysis, this downtrend should be over, and now, it is expected a corrective move to the upside. An impulse Elliott Wave has been successfully completed, hence we should see some profit taking in the very short-run. On the daily chart, we can spot a beautiful descending parallel channel , and I think the bulls can step in to destroy this pattern. As you may noticed on the following chart, we had 2 fake-outs during this downtrend, indicating a corrective move. Usually, the third breakout is real! The profit target is at 0.618 FIB + the start of wave 4.
Hence, our technical analysis are suggesting to go Short at or above 1.01, setting a Stop Loss at 1.025, and to go Long at or below 1.01882, setting a Stop Loss at 0.98.
As of 12:15 PM (GMT), the EURUSD was trading at 1.01311.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, July, 29: exchange rate 1.0289 Dollars, maximum 1.0443, minimum 1.0135. EUR to USD forecast on Monday, August, 1: exchange rate 1.0186 Dollars, maximum 1.0339, minimum 1.0033. Euro to Dollar forecast on Tuesday, August, 2: exchange rate 1.0190 Dollars, maximum 1.0343, minimum 1.0037. EUR to USD forecast on Wednesday, August, 3: exchange rate 1.0180 Dollars, maximum 1.0333, minimum 1.0027.
In 1 week, Euro to Dollar forecast on Thursday, August, 4: exchange rate 1.0228 Dollars, maximum 1.0381, minimum 1.0075. EUR to USD forecast on Friday, August, 5: exchange rate 1.0179 Dollars, maximum 1.0332, minimum 1.0026. Euro to Dollar forecast on Monday, August, 8: exchange rate 1.0260 Dollars, maximum 1.0414, minimum 1.0106. EUR to USD forecast on Tuesday, August, 9: exchange rate 1.0323 Dollars, maximum 1.0478, minimum 1.0168. Euro to Dollar forecast on Wednesday, August, 10: exchange rate 1.0387 Dollars, maximum 1.0543, minimum 1.0231.
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. 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 future performance of the EUR/USD.
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