Forex Forecast: 16 – 20 May 2022

 

EURUSD Rates Week in Review

Last week, our technical indicators suggested to go Long at or below 1.08509, setting a Stop Loss at 1.05, and Short it at or above 1.08536, setting a Stop Loss at 1.09732.

This week, EURUSD price range was 1.0594 high, set this past Monday, and 1.0401 low, set today, Thursday. So, Monday, we could have bought the currency pair at 1.05, selling it on an intraday trading at 1.0592, for 0.88% profit. Tuesday, we could have bought it at 1.0527, selling it on an intraday trading at 1.0584, for 0.54% profit. Wednesday, we could have bought it at 1.0504, selling it on an intraday trading at 1.0575, for 0.68% profit. Today, Thursday, we could have bought it at 1.05, selling it on an intraday trading at 1.0528, for an extra 0.27% ROI.

 Fundamental Overview

EURUSD has declined sharply in the early European session on Thursday with the dollar capitalizing on safe-haven flows. The next bearish target for the pair is located at 1.0400 and it looks unlikely to stage a correction unless the risk mood improves later in the day.

Investors seek refuge in the second half of the week amid heightened inflation fears. The data from the US showed on Wednesday that the Consumer Price Index (CPI) stood at 8.3% in April, surpassing the market expectation of 8.1%. Additionally, European Central Bank President (ECB) Christine Lagarde acknowledged that it was increasingly unlikely for the disinflationary dynamics of the past decade to return. “Our inflation projections are increasingly pointing towards inflation being on target over the medium term,” Lagarde added.

Mirroring the intense flight-to-safety, the Euro Stoxx 600 Index is down more than 2% on the day and US stock index futures are losing between 0.5% and 0.8%.

In case Wall Street’s main indexes suffer heavy losses after the opening bell, the greenback should continue to gather strength and force EUR/USD to push lower.

The US economic docket will feature the Producer Price Index (PPI) data for April on Thursday, which is expected to decline to 10.7% on a yearly basis in April from 11.2% in March. A weaker-than-forecast PPI print could cap the dollar’s upside in the short term but this single data point by itself is unlikely to change investors’ minds regarding the inflation outlook.

Technical Analysis

EURUSD slumps to multi-year lows below mid-1.0400s, as it stays under bearish pressure in the European session and continues to push lower.

With the dollar capitalizing on safe-haven flows ahead of the Producer Price Index (PPI) data on Thursday, the pair trades at its lowest level in more than five years below 1.0450.

 

The Relative Strength Index (RSI) on the four-hour chart stays slightly above 30, suggesting that the pair has little more room on the downside before turning technically oversold.

Nevertheless, the risk-averse market atmosphere should limit the pair’s recovery attempts.

On the downside, 1.0400 (psychological level, static level from January 2017) aligns as the next bearish target ahead of 1.0340 (January 3, 2017, low).

1.0500 (psychological level, former support) forms the first technical resistance. Above that level, the descending trend line coming from April 23 forms a significant hurdle at 1.0530, where the 20 and 50-period SMAs are located. Only a daily close above 1.0530 could be seen as a bullish development and cause sellers to move to the sidelines.

 For next week, we are expecting some consolidation on the currency pair. Our technical analysis is recommending to go Long at or below 1.05, setting a Stop Loss at 1.035, and Short it at or above 1.05467, setting a Stop Loss at 1.07.

 

As of 1:51 PM (GMT), the EURUSD was trading at 1.04217.

 

EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, May, 13: exchange rate 1.0505 Dollars, maximum 1.0663, minimum 1.0347. EUR to USD forecast on Monday, May, 16: exchange rate 1.0476 Dollars, maximum 1.0633, minimum 1.0319. Euro to Dollar forecast on Tuesday, May, 17: exchange rate 1.0482 Dollars, maximum 1.0639, minimum 1.0325. EUR to USD forecast on Wednesday, May, 18: exchange rate 1.0493 Dollars, maximum 1.0650, minimum 1.0336.

 

In 1 week, Euro to Dollar forecast on Thursday, May, 19: exchange rate 1.0413 Dollars, maximum 1.0569, minimum 1.0257. EUR to USD forecast on Friday, May, 20: exchange rate 1.0513 Dollars, maximum 1.0671, minimum 1.0355. Euro to Dollar forecast on Monday, May, 23: exchange rate 1.0528 Dollars, maximum 1.0686, minimum 1.0370. EUR to USD forecast on Tuesday, May, 24: exchange rate 1.0537 Dollars, maximum 1.0695, minimum 1.0379. Euro to Dollar forecast on Wednesday, May, 25: exchange rate 1.0481 Dollars, maximum 1.0638, minimum 1.0324.

 

 

 

 

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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