Forex Forecast: 1 – 5 February 2021
EURUSD Rates Week in Review
Last week, our technical indicators suggested to Short the EURUSD at or above 1.21431. Throughout this week, EURUSD has been trading in a price range of 1.2184 high, set this past Monday, and 1.2057 low, set yesterday, Wednesday. We were right once again, predicting EURUSD price trend for this week, and we could have had a good profit trading week, as on Monday, we could have Short it at 1.2182, covering it on an intraday trading at 1.2113, for 0.97% profit. Tuesday, Short it at 1.2175, converting it on a intraday trading at 1.2105, for 0.57% profit. Wednesday. Short it at 1.2168, covering it on an intraday trading at 1.2055, for 0.93% profit. Today, Thursday, we could have Short it at 1.2111, covering it on an intraday trading at 1.2077, for an extra 0.28% trade gain, closing the week with a total of 2.75% ROI.
Light at the end of the tunnel? That may be a truck coming at full speed to ram EURUSD bulls. The recent falls may be the beginning of a more significant downfall, which could send the pair to fresh 2021 lows.
Here are some reasons for an extended downfall:
1) Market gloom
The madness around Gamestop, where retail traders are pushing the valuation of a videogame firm and defeating hedge funds may be a sign of market exuberance and a late-stagy rally. While several shares such as GME are skyrocketing, the bigger ones are on the back foot in fear of a sell-off.
When shares fall, the safe-haven dollar gains, weighing on EURUSD. The Federal Reserve did its best to cheer investors by committing to support the economy as much as needed and refusing to see the recent equity frenzy as “froth.” Moreover, Fed Chair Jerome Powell said that it is premature to talk about an exit and that the economy has a long way to go. His words imply lower rates and elevated bond-buying for longer.
If the world’s most powerful central bank is unable to turn the market mood, at least for now there is more room for risk aversion.
- Federal Reserve Holds Policy Steady; Vaccine crucial to recovery
- Fed Quick Analysis: Powell refuses to stop the stock party, dollar may suffer some pressure
2) ECB becoming tough
On the other side of the pond, European Central Bank member Klaas Knot explicitly complained about the high valuation of the euro, adding that his institution has tools to deal with it. Later on, reports suggested that the ECB may further cut its deposit rate, at -0.50%. The specter of more cuts is weighing on the euro. During 2020, the ECB expanded its balance sheet, but the euro advanced instead of falling.
3) AstraZeneca-EU row
Some Spanish regions are already running out of vaccine dose. What began as a delay from Pfizer/BioNTech was compounded by a delay of jabs from AstraZeneca and now aims to derail the recovery. Brussels and the British pharmaceutical firm are feeding about the timing of doses’ deliveries, with the bloc suggesting it could go to courts. The European Medicines Agency is set to approve AstraZeneca’s immunization on Friday.
4) US Data may be depressing
Economists expect America’s economy to have grown by 3.9% annualized in the fourth quarter of 2020, but it could be lower. Durable Goods Orders figures for December mostly missed estimates and Retail Sales dropped in both November and December, the holiday season.
Weekly jobless claims also carry expectations for improvement, yet from worrying levels as well. Applications are set to drop from 900,000, and if they remain too high, another month of job losses is likely in the US. weak figures are set to further depress markets, boosting the safe-haven dollar instead of weighing on it.
EURUSD looks to extend Wednesday’s drop below 1.2100, as stock markets remain weak. Risk-off overshadows dovish Fed, boosts demand for the US dollar. Data-wise, the focus would be on the preliminary German CPI for January and US Q4 advance GDP release.
EURUSD has decisively dropped below the 50 and 100 Simple Moving Average on the four-hour chart and is suffering from downside momentum. Moreover, the Relative Strength Index is still above 30, outside oversold conditions.
Bears are eyeing 1.2080, the daily low, as their first target. Critical support is at 1.2060, Wednesday’s swing low and just above the 2021 trough of 1.2055. This near-perfect double-bottom is critical support. The next level to watch is 1.20.
Looking up, some resistance awaits at 1.2130, which is where the 50 SMA hits the price, followed by 1.2160 and then by 1.2190, the latter being a strong cap.
EURUSD Price Trend Forecast is however, long-term bullish, having breakout points to 1.2750.
For next week, as illustrated in the following 4-hour EURUSD chart, our technical analysis indicators are suggesting to go Short on the currency pair because of a possible head and shoulder, which might break today, and go to 1.1900, which is also a support zone. However, we would prefer to wait for the price to break the neckline, and then look for entry short position at 1.21057. Once, it gets to 1.1900, we would consider to close all Short positions, and go Long at or below 1.19.
As of 10:37 AM (GMT), the EURUSD was trading at 1.21074.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, January, 29: exchange rate 1.2065 Dollars, maximum 1.2246, minimum 1.1884. EUR to USD forecast on Monday, February, 1: exchange rate 1.2084 Dollars, maximum 1.2265, minimum 1.1903. Euro to Dollar forecast on Tuesday, February, 2: exchange rate 1.2056 Dollars, maximum 1.2237, minimum 1.1875. EUR to USD forecast on Wednesday, February, 3: exchange rate 1.2053 Dollars, maximum 1.2234, minimum 1.1872.
In 1 week, Euro to Dollar forecast on Thursday, February, 4: exchange rate 1.2116 Dollars, maximum 1.2298, minimum 1.1934. EUR to USD forecast on Friday, February, 5: exchange rate 1.2096 Dollars, maximum 1.2277, minimum 1.1915. Euro to Dollar forecast on Monday, February, 8: exchange rate 1.2150 Dollars, maximum 1.2332, minimum 1.1968. EUR to USD forecast on Tuesday, February, 9: exchange rate 1.2145 Dollars, maximum 1.2327, minimum 1.1963. Euro to Dollar forecast on Wednesday, February, 10: exchange rate 1.2075 Dollars, maximum 1.2256, minimum 1.1894.
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.