Forex Forecast: 19 – 23 July 2021

 

EURUSD Rates Week in Review

Last week, our technical indicators suggested to go Long on the currency pair at or below 1.18650, setting a Stop loss at 1.17002, and Short it at or above 1.21, setting a Stop loss at 1.22.

This week, EURUSD price range was 1.1851 high, set today, Thursday, and 1.1772 low, set this past Tuesday and Wednesday. Hence, we could have Bought the currency pair this past Monday at 1.1840, selling it on an intraday trading at 1.1879 for 0.33% profit. Tuesday, we could bought it at 1.1774, selling it on an intraday trading at 1.1874, for 0.85% profit. Wednesday, we could have bought it at 1.1774, selling it on an intraday trading at 1.1837, for 0.54%. Today, Thursday, we could have bought it at 1.1823, selling it on an intraday trading at 1.1849, for an extra 0.22% profit.

Fundamental Overview

“Still a ways off” were the words by Federal Reserve Chair Jerome Powell have resulted in a lift-off for EURUSD, or more precisely, a slide of the dollar. The world’s most powerful central banker has told members of a House committee that the economy is still far from making “substantial that would warrant reducing the Fed’s current $120 billion/month bond-buying scheme”. More dollars printed mean a weaker currency, causing future inflation because as Money Supply increases faster than real output then, ceteris paribus, inflation will occur. If you print more money, the amount of goods doesn’t change. If there is more money chasing the same amount of goods, it will be inevitable that firms will just put up prices.

Moreover, Powell dismissed surprisingly strong inflation figures as transitory. The headline Consumer Price Index hit 5.4% YoY in June, yet it was driven by costs of used vehicles, car rentals, airfares, hotel stays and apparel, all related to the rapid reopening. He did expect inflation to remain elevated for a few more months, but to drop later on.

The Fed Chair’s prepared remarks came out just the US released producer price statistics for June, which smashed estimates with monthly increases of 1% on both the headline and the core figures.

Further, Powell is slated to appear before a Senate committee later in the day, and he could keep the pressure going. Investors will also eye weekly jobless claims and two manufacturing surveys released by the Fed, one for the New York region and the other for Philadelphia.

Perhaps more importantly, the focus on Capitol Hill remains of importance as discussions about a $3.5 trillion infrastructure bill agreed by a wide group of Democrats is high on the agenda.

However, the question remains. Will conservative members such as Senator Joe Manchin back the deal? If progress is made, the dollar could gain on prospects of higher inflation and thus rate hikes coming sooner rather than later.

However, if politicians bicker, the greenback could decline. Less government spending means depressed bond issuance, and a potential drop in Treasury yields could weigh on the dollar. At least in the very short-run, there is little chance for a breakthrough, potentially weighing on the greenback.

Another factor that could temporarily weigh on the greenback comes from the rapid spread of the Delta Covid variant. Cases continue rising in Europe, weighing on the euro.

The same is happening in the US and, while it may eventually have a positive impact on the dollar, Powell could respond by warning of its negative impact on the economy, thus weighing on the greenback.

 

Overall, there is room for EURUSD to extend its gains.

 Technical Analysis

EURUSD retreats from highs ahead of US jobless claims, Powell. EURUSD is trading below 1.1850, off the highs. The market mood has cooled after Wednesday’s enthusiasm from Fed Chair Powell’s dovish message. He speaks again on Thursday. US jobless claims and Covid headlines are also eyed.

Eurodollar has surpassed the 50 Simple Moving Average as illustrated in the above four-hour chart, while downside momentum is diminishing. However, the currency pair still trades below the 100 and 200 SMAs.

Some resistance is at 1.1860, where the 100 SMA hits the price. It is followed by 1.1880, a stubborn cap, and the by 1.19 and 1.1950.

Support awaits at 1.1825, which cushioned EURUSD in recent days, then by 1.1775, the multi-month low. The next level to watch is 1.1740.

For next week, EURUSD is still making lower lows and has been bearish for a while.
As you see in the following 1h chart, the ascending trend line has been broken out to the downside and price is pulling back to it. Moreover, the important support level at 1.18 is broken and price has been closed below it.

Currently, price is in the correction phase, and our technical indicators expect a rise around 1.1820 – 1.1835, which is about 50% to 68% retrace. In the meantime, MACD shows a negative regular divergence.

If price retraced and got rejected by the mentioned levels, we can expect a fall in price again first to 1.1772 which is the yesterday’s low and then to 1.1710 which is a support level . Hence, our technical indicators are suggesting to go Short on the currency pair at or above 1.1778, setting a Stop loss at 1.19, and to go Long at or below 1.1740, setting a Stop loss at 1.1685.

 

As of 12:34 PM (GMT+1), the EURUSD was trading at 1.1816.

 

EUR to USD forecast for tomorrow:  Euro to Dollar forecast on Friday, July, 16: exchange rate 1.1899 Dollars, maximum 1.2077, minimum 1.1721. EUR to USD forecast on Monday, July, 19: exchange rate 1.1815 Dollars, maximum 1.1992, minimum 1.1638. Euro to Dollar forecast on Tuesday, July, 20: exchange rate 1.1801 Dollars, maximum 1.1978, minimum 1.1624. EUR to USD forecast on Wednesday, July, 21: exchange rate 1.1831 Dollars, maximum 1.2008, minimum 1.1654.

 

In 1 week, Euro to Dollar forecast on Thursday, July, 22: exchange rate 1.1869 Dollars, maximum 1.2047, minimum 1.1691. EUR to USD forecast on Friday, July, 23: exchange rate 1.1846 Dollars, maximum 1.2024, minimum 1.1668. Euro to Dollar forecast on Monday, July, 26: exchange rate 1.1846 Dollars, maximum 1.2024, minimum 1.1668. EUR to USD forecast on Tuesday, July, 27: exchange rate 1.1846 Dollars, maximum 1.2024, minimum 1.1668. Euro to Dollar forecast on Wednesday, July, 28: exchange rate 1.1828 Dollars, maximum 1.2005, minimum 1.1651.

 

 

 

 

 

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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