Forex Forecast: 17 – 21/02/2020
How to use the basic technical analysis concepts we have shared with you to predict the next week’s currency pair price movement
EURUSD Rates Week in Review
Last week and throughout this week we have noticed consistent weakness on the EURUSD. How low can the euro go? Even though, we believe the intrinsic fundamental value is at around $1.11 as stated last week, the world’s most popular currency pair has hit the lowest since May 2017, a 33-month trough, after dropping below the 2019 low of 1.0879. While it is bouncing from the lows, this may prove yet another dead-cat bounce pattern that has characterized the pair’s trading. Hence, there was no opportunity for long positions profit on our last week technical recommendation, to buy EURUSD below 1.0982 and sell it at 1.10775. Throughout this week the EURUSD trade at the high of 1.0959 and 1.0852 low. The continue downside move on the EURUSD has been driven by both euro weakness and dollar strength.
Most of the EURUSD recent downfall causes are:
1) Manufacturing slump: Investors fear that Germany’s manufacturing slump is here to stay. Recent industrial output figures for the largest economy – and also for France and the whole eurozone have pointed to a sharp downfall in December and the whole of 2019. It may take the old continent more time to stand on its feet.
2) More monetary stimulus? The European Central Bank is unlikely to exit its accommodative policies anytime soon – especially if it leaves its current inflation calculations unchanged. According to reports, the ECB will refrain from including house prices in its Consumer Price Index formula. That means that overall CPI is set to remain lower – causing the Frankfurt-based institution to keep interest rates lower for longer. Pablo Hernandez de Cos, a member of the ECB, said that policy is to remain highly accommodative for a long time. This is also weighing on the euro.
3) German political instability: Staying in Germany, the ruling coalition remains fragile after the resignation of Annegret Kramp Karrenbauer from leading Chancellor Angela Merkel’s CDU party. The lack of political leadership in Europe’s “locomotive” is also an issue.
4) American strength: The US economy remains robust with job growth rising at a satisfactory pace, and consumption on a roll. While manufacturing is not where may want it to be, recent surveys have shown that the industry is stable. Jerome Powell, Chairman of the Federal Reserve has reaffirmed the Fed’s willingness to act “aggressively” in a downturn but reiterated that he sees no reason to see the expansion ending. The US publishes inflation figures for January, with annual Core CPI expected to tick down from 2.3% to 2.2%. For comparison, the eurozone’s parallel figure stands at 1.1% according to the preliminary read.
5) Coronavirus: After several days of calm, the market mood has soured once again, boosting the safe-haven US dollar. China’s Hubei province, the epicenter of the respiratory disease has reported a leap of 15,000 cases and 240 deaths, ending the cycle of deceleration. Moreover, the growing number of cases aboard the Princess Diamond cruise ship stranded in Japanese waters demonstrates rapid contagion. The economic damage continues with the cancelation of the Mobile World Congress, a large conference in Barcelona that sees 100,000 visitors standing out. Overall, the wind is blowing in favor of EUR/USD bears. Coronavirus headlines and further speculation about central bank activity is to move the currency pair.
The recent bounce has caused the Relative Strength Index on the four-hour chart to rise above 30 – exiting oversold conditions and implying more falls. Momentum remains to the downside and the currency pair is trading below the 50, 100, and 200 Simple Moving Averages. Support awaits at 1.0879, the 2019 low. It is followed by the 2020 trough of 1.0865.
Next, we are back to levels last seen in 2017. These include 1.0820, 1.0790 and 1.0720. Resistance is at 1.0890, a swing low from earlier this week, followed by 1.0925 that capped EUR/USD on Wednesday. Next, 1.0940, 1.0965, and 1.0985 await it.
For next week, and as of today at 2:33 PM (GMT+0), the EURUSD last trade was 1.0852. Since 1.0900 support price level was broken and has now become a resistance price, our technical analysis has rated next week trading a strong sell on the EURUSD, taking any rallies on the EURUSD as a selling opportunity at around 1.10 and 1.09530. So, we would be selling on the EURUSD on any rebound to sell it at 1.08, even though my selling target would be 1.0750.
EUR to USD forecast for tomorrow
Euro to Dollar forecast on Friday, February, 14: exchange rate 1.0826 Dollars, maximum 1.0988, minimum 1.0664. EUR to USD forecast on Monday, February, 17: exchange rate 1.0833 Dollars, maximum 1.0995, minimum 1.0671. Euro to Dollar forecast on Tuesday, February, 18: exchange rate 1.0800 Dollars, maximum 1.0962, minimum 1.0638. EUR to USD forecast on Wednesday, February, 19: exchange rate 1.0766 Dollars, maximum 1.0927, minimum 1.0605.
In 1 week Euro to Dollar forecast on Thursday, February, 20: exchange rate 1.0745 Dollars, maximum 1.0906, minimum 1.0584. EUR to USD forecast on Friday, February, 21: exchange rate 1.0701 Dollars, maximum 1.0862, minimum 1.0540. Euro to Dollar forecast on Monday, February, 24: exchange rate 1.0685 Dollars, maximum 1.0845, minimum 1.0525. EUR to USD forecast on Tuesday, February, 25: exchange rate 1.0654 Dollars, maximum 1.0814, minimum 1.0494. Euro to Dollar forecast on Wednesday, February, 26: exchange rate 1.0715 Dollars, maximum 1.0876, minimum 1.0554.
Again, remember to place stop losses, according to your risk tolerance as unexpected news coming to the market may significantly affect trends and prices. Until the next article, we wish all of you 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 nore KeySoft. 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 the future performance of the EUR/USD.