EURUSD Rates Week in Review

Last week, our technical indicators suggested to go Long at or below 1.05081, setting a Stop Loss at 1.04, and to go Short at or above 1.05082, setting a Stop Loss at 1.065.

This week, EURUSD price range was 1.0696 high set this past Wednesday, and 1.0506 low set this past Monday. So, Monday, we could have short the currency pair at 1.0579, covering it on an intraday trading at 1.0504, for 0.71% profit. Tuesday, we could have short the currency pair at 1.065, covering it on an intraday trading at 1.0529, for 1.14% profit. Wednesday, we could have short it at 1.065, covering it on an intraday trading at 1.0621, for 0.27% profit. Thursday, we could have short it at 1.065, covering it on an intraday trading at 1.0608, for an extra 0.39% ROI.

Fundamental Overview

EURUSD has lost its traction and retreated below 1.0650 early Thursday after having touched its highest level in over six months near 1.0700. The near-term technical outlook points to a loss of bullish momentum but the pair could target new fresh multi-month highs in case the European Central Bank (ECB) delivers a hawkish message.

On Wednesday, the US Federal Reserve raised its policy rate by 50 basis points (bps) to the range of 4.25-4.5% as expected. Although the dot plot showed that the terminal rate projection in 2023 rose to 5.1% from 4.6% in September, the positive impact of this hawkish outlook on the US Dollar remained short-lived.

Chairman Jerome Powell continued to push back against the market expectation for a rate cut in late 2023 but failed to convince markets. Nevertheless, the US Dollar Index, which dropped to a fresh multi-month low below 103.50 on Wednesday, regained its traction on risk aversion and climbed above 104.00 on Thursday.

The ECB is forecast to hike key rates by 50 bps. The ECB will also publish its quarterly projections. Reuters reported on Wednesday that the ECB will project inflation comfortably above 2% through 2024.

Several policymakers have advocated for one more 75 bps increase in rates following the October policy meeting and a 75 bps hike at this meeting would offer a significant hawkish surprise and trigger a strong rally in EUR/USD. If the ECB opts for a 50 bps increase as anticipated, details surrounding the quantitative tightening could drive the Euro’s reaction. In case the ECB unveils a timeline of how it plans to reduce the balance sheet, the Euro is likely to hold its ground against its major rivals.

On the other hand, a 50 bps rate hike alongside a gloomy growth outlook and an uncertain QT could weigh on the Euro and cause EUR/USD to extend its slide.

Technical Analysis

EURUSD drops below 1.0650, ECB policy announcements eyed. The currency pair is holding lower ground below 1.0650, as the risk-off mood gains traction, underpinning the US Dollar demand. The Fed projected a higher rate peak after announcing a 50 bps rate hike. The Euro awaits the ECB rate decision for fresh trading impetus.

As seen in the following chart, EURUSD dropped below the mid-point of the ascending regression channel and the Relative Strength ındex (RSI) indicator on the four-hour chart declined toward 50, pointing to a loss of bullish momentum.

On the downside, 1.0600 (20-period Simple Moving Average (SMA) on the following four-hour chart, psychological level) aligns as interim support ahead of 1.0580 (lower limit of the ascending channel). In case EUR/USD drops below the latter and fails to reclaim it, it could extend its slide toward 1.0550 (50-period SMA) and 1.0500 (psychological level).

1.0630 (mid-point of the ascending channel) forms initial resistance. If EURUSD manages to stabilize above that level, it could target 1.0660 (upper limit of the ascending channel) and 1.0700 (psychological level, static level).

For next week, Yesterday’s economic data suggests more positive conclusions in the medium term. The price breaks through the resistance and forms a consolidation above 1.063, from here the upside potential opens.

The trend remains bullish and the price may reach 1.0748 resistance in the near future. Bulls have managed to maintain their position above 1.063, and the next target price will be 1.0748.

However, a false breakdown scenario is possible. If the price returns to the channel and consolidates under the resistance, the price may fall to 1.0496.

Hence, for next week, our technical analysis are suggesting to go Long at or below 1.07, setting a Stop Loss at 1.0552, and to go Short at or above 1.07, setting a Stop Loss at 1.07485.

As of 12:46 PM (GMT), the EURUSD was trading at 1.06219.

 

EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, December, 16: exchange rate 1.0732 Dollars, maximum 1.0893, minimum 1.0571. EUR to USD forecast on Monday, December, 19: exchange rate 1.0828 Dollars, maximum 1.0990, minimum 1.0666. Euro to Dollar forecast on Tuesday, December, 20: exchange rate 1.0825 Dollars, maximum 1.0987, minimum 1.0663. EUR to USD forecast on Wednesday, December, 21: exchange rate 1.0809 Dollars, maximum 1.0971, minimum 1.0647.

In 1 week, Euro to Dollar forecast on Thursday, December, 22: exchange rate 1.0860 Dollars, maximum 1.1023, minimum 1.0697. EUR to USD forecast on Friday, December, 23: exchange rate 1.0905 Dollars, maximum 1.1069, minimum 1.0741. Euro to Dollar forecast on Monday, December, 26: exchange rate 1.0872 Dollars, maximum 1.1035, minimum 1.0709. EUR to USD forecast on Tuesday, December, 27: exchange rate 1.0840 Dollars, maximum 1.1003, minimum 1.0677. Euro to Dollar forecast on Wednesday, December, 28: exchange rate 1.0846 Dollars, maximum 1.1009, minimum 1.0683.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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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