Forex Forecast: 16 – 20 January 2023
Last week, our technical indicators suggested going Short at or above 1.0596, setting a stop loss at 1.0708, and going Long at or below 1.05678, setting a stop loss at 1.0459.
This week, EURUSD price range was 1.0777 high set yesterday, Wednesday, and 1.0636 low, set this past Monday. Following our trading discipline, this week we just had one trading opportunity to Short the currency pair on Monday at 1.0708, covering it on an intraday trading at 1.0638, for 0.65% ROI.
Financial markets kick-started Thursday with optimism putting mild pressure on the US Dollar, although activity remained constrained ahead of the release of the United States Consumer Price Index (CPI). The EURUSD pair peaked at 1.0761 and bottomed at 1.0742 during the European session, as investors hope US December inflation data will provide a clear picture of what the US Federal Reserve (Fed) would decide on monetary policy.
The headline CPI is foreseen up by 6.5% in the 12-month to December, much better than the previous 7.1% and decreasing further from the multi-decade peak posted in June of 9.1%. Investors will pay close attention to the core reading, which excludes volatile food and energy prices. Core inflation peaked at 6.6% YoY in September, easing towards 6% in November. The latest reading is expected at 5.7%, which will further support the case of easing inflation and a potential pivot in monetary policy.
It is worth clarifying that Fed officials have supported the case for additional rate hikes ahead of “pause and hold.” Once the benchmark rate reaches a certain level, it will stay there for some time, without rate cuts in sight for this year. The terminal rate, according to Fed, is of 5%-5.25%. It currently stands at 4.25% – 4.5%, which means the Fed is measly 75 bps away from its goal and should reach it in the next two meetings. Inflation data could change the picture and hence, trigger sharp reactions.
Alongside inflation figures, the US will release Initial Jobless Claims for the week ended January 6, previously up by 204K.
EURUSD is struggling to find direction and moving sideways slightly above 1.0750 on Thursday. With investors staying on the sidelines while waiting for the December Consumer Price Index (CPI) data from the US, the US Dollar is struggling to find demand.
From a technical perspective, the EURUSD pair is poised to run, despite the lack of directional strength seen this week. The pair is developing a handful of pips above the 61.8% retracement of the 2020 yearly slide at 1.0745, having spent most of the week seesawing around the level.
Upside pressure stands intact, as the daily chart shows that the pair posts higher lows although and manages to end in the green, despite the limited volumes. Technical indicators in the mentioned time frame hold within positive levels, with the Momentum grinding marginally higher and the Relative Strength Index (RSI) flat at 63. Finally, moving averages have uneven bullish strength but are still heading north below the current level, supporting an upward extension.
In the near term, and according to the 4-hour chart, the risk also skews to the upside. The 20 SMA has extended its advance above the longer ones to actually converge with the aforementioned Fibonacci support. Technical indicators stand directionless but within positive levels, with the Momentum resting above its 100 level and the RSI consolidating at around 67.
Support levels are at 1.0740, 1.0690, and 1.0630.
Resistance levels are at 1.0800, 1.0845, and 1.0890.
For next week, and as illustrated in the following chart, we expect a retracement on the EURUSD. Hence, our technical analysis are suggesting going Short at or above 1.07808, setting a stop loss at 1.09, and going Long at or below 1.06, setting a stop loss at 1.0525.
As of 2:07 PM (GMT), the EURUSD was trading at 1.0819.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, January, 13: exchange rate 1.0789 Dollars, maximum 1.0951, minimum 1.0627. EUR to USD forecast on Monday, January, 16: exchange rate 1.0791 Dollars, maximum 1.0953, minimum 1.0629. Euro to Dollar forecast on Tuesday, January, 17: exchange rate 1.0879 Dollars, maximum 1.1042, minimum 1.0716. EUR to USD forecast on Wednesday, January, 18: exchange rate 1.1001 Dollars, maximum 1.1166, minimum 1.0836.
In 1 week, Euro to Dollar forecast on Thursday, January, 19: exchange rate 1.0918 Dollars, maximum 1.1082, minimum 1.0754. EUR to USD forecast on Friday, January, 20: exchange rate 1.0976 Dollars, maximum 1.1141, minimum 1.0811. Euro to Dollar forecast on Monday, January, 23: exchange rate 1.0851 Dollars, maximum 1.1014, minimum 1.0688. EUR to USD forecast on Tuesday, January, 24: exchange rate 1.0818 Dollars, maximum 1.0980, minimum 1.0656. Euro to Dollar forecast on Wednesday, January, 25: exchange rate 1.0865 Dollars, maximum 1.1028, minimum 1.0702.
Until next article, wishing all of you a wealthy trading!
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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