Forex Forecast: 15 – 19 August 2022
EURUSD Rates Week in Review
Last week, our technical indicators suggested to go Short at or above 1.01, setting a Stop Loss at 1.0357, and to go Long at or below 1.02, setting a Stop Loss at 0.99.
This week, EURUSD price range was 1.0368 high, set yesterday, Wednesday, and 1.0159 low, set this past Monday. So, Monday, we could have Short the currency pair at 1.0220, Covering it on an intraday trading at 1.0161, for 0.58% profit. Also Monday, we could have Bought it at $1.0161, Selling it on an intraday trading at $1.0220, for 058% ROI. Tuesday, we could have Short it at 1.0245, Covering it on an intraday trading at 1.0191, for 0.53% profit. Also Tuesday, we could have Bought it at $1.0191, Selling it on an intraday trading at $1.0245, for 0.53% ROI. Wednesday, we could have Short it at 1.0357, Covering it on an intraday trading at 1.0204, for 1.45% profit. Thursday, we could have Short it at 1.0341, Covering it on an intraday trading at 1.0278, for an extra 0.61% ROI.
Fundamental Overview
EUR/USD has capitalized on the broad-based dollar weakness on Wednesday and climbed to its highest level in a month near 1.0370. Following a consolidation phase during the Asian trading hours, the pair has regained its traction and advanced beyond 1.0300.
In order to extend its rally, however, EUR/USD needs to clear the stiff resistance that seems to have formed at 1.0370.
After the data published by the US Bureau of Labor Statistics revealed that annual inflation, as measured by the Consumer Price Index (CPI), declined to 8.5% in July from 9.1% in June, the greenback came under heavy selling pressure. More importantly, Core CPI, which strips volatile food and energy prices, remained steady at 5.9%, compared to the market expectation of 6.1%.
Although the initial reaction to soft US inflation data caused the probability of a 50 basis points (bps) Fed rate hike to jump to 70% from 35%, Fed policymakers did their best not to allow markets to get carried away.
Minneapolis Fed President Neel Kashkari and San Francisco Fed President Mary Daly both noted that they were still far away from declaring victory on inflation. Moreover, Chicago Fed President Charles Evans said that they were not finished with rate hikes and added that he was expecting the fed funds rate to top out at 4%. Following these comments, the odds of a 50 bps September rate increase declined below 60%.
Nevertheless, the risk-positive market environment doesn’t allow the greenback to stay resilient against its rivals and EUR/USD’s bullish bias stays intact in the second half of the week.
Later in the day, the US economic docket will feature the weekly Initial Jobless Claims and July Producer Price Index (PPI) data. Markets expect the annual PPI for final demand to retreat to 10.4% from 11.3% in June. Unless the PPI continues to rise unexpectedly, the dollar could have a hard time staging a recovery. Additionally, US stock index futures are up between 0.4% and 0.6% in the European morning, suggesting that risk flows are likely to dominate the financial markets during the American session.
Technical Analysis
EURUSD rebounds above 1.0300 as dollar resumes post-US CPI decline. The currency pair has jumped back above 1.0300 amid fresh weakness in the US dollar. Risk sentiment regains traction despite the US-Sino tensions and China’s covid woes. Investors reassess the US inflation data and its impact on Fed rate hike expectations.
The Relative Strength Index (RSI) indicator on the four-hour chart climbed into the overbought territory above 70 during the American session on Wednesday.
With EURUSD edging lower early Thursday, the RSI declined to 60 before turning north once again. This action confirms that the pair remains bullish following the technical downward correction.
1.0370 (Fibonacci 61.8% retracement of the latest downtrend, Aug. 10 high) aligns as key resistance. In case this level turns into support, EUR/USD could target 1.0400 (psychological level) and 1.0450 (static level).
On the downside, 1.0300 (psychological level, Fibonacci 50% retracement) aligns as interim support ahead of 1.0230 (Fibonacci 38.2% retracement, 200-period SMA on the four-hour chart) and 1.0200 (psychological level, 100-period SMA).
For next week, our technical analysis are suggesting to go Short at or above 1.02, setting a Stop Loss at 1.0425, and to go Long at or below 1.01, setting a Stop Loss at 0.98.
As of 1:23 PM (GMT+1), the EURUSD was trading at 1.03428.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, August, 12: exchange rate 1.0393 Dollars, maximum 1.0549, minimum 1.0237. EUR to USD forecast on Monday, August, 15: exchange rate 1.0413 Dollars, maximum 1.0569, minimum 1.0257. Euro to Dollar forecast on Tuesday, August, 16: exchange rate 1.0422 Dollars, maximum 1.0578, minimum 1.0266. EUR to USD forecast on Wednesday, August, 17: exchange rate 1.0356 Dollars, maximum 1.0511, minimum 1.0201.
In 1 week, Euro to Dollar forecast on Thursday, August, 18: exchange rate 1.0435 Dollars, maximum 1.0592, minimum 1.0278. EUR to USD forecast on Friday, August, 19: exchange rate 1.0440 Dollars, maximum 1.0597, minimum 1.0283. Euro to Dollar forecast on Monday, August, 22: exchange rate 1.0345 Dollars, maximum 1.0500, minimum 1.0190. EUR to USD forecast on Tuesday, August, 23: exchange rate 1.0380 Dollars, maximum 1.0536, minimum 1.0224. Euro to Dollar forecast on Wednesday, August, 24: exchange rate 1.0411 Dollars, maximum 1.0567, minimum 1.0255.
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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