Forex Forecast: 2 – 6 August 2021

 

EURUSD Rates Week in Review

Last week, our technical indicators suggested to Short the EURUSD at or above 1.1750, setting a stop loss at 1.1880, and entry a Long position at or below 1.17, setting a stop loss at 1.16.

This week, EURUSD price range was 1.1881 high, set today, Thursday, and 1.1763 low, set this past Monday. Hence, we could have Short the currency pair on Monday at 1.1816, buying it back on an intraday trading at 1.1765 for 0.43% profit. Tuesday, we could short it 1.1839, buying it on an intraday trading at 1.1767, for 0.61% profit. Wednesday, we could short it 1.1849, buying it on an intraday trading at 1.1771, for 0.66% profit. Today, Thursday, we could have short it at 1.1879, buying it on an intraday trading at 1.1839, for an extra 0.34% ROI.

Fundamental Overview

“We’re not there”, these words by Federal Reserve Chair Jerome Powell on tapering its bond-buying scheme have been weighing on the dollar, and there may be more in store. The world’s most powerful central bank has only taken a baby step toward reducing its $120 billion/month program in July, and August’s Jackson Hole meeting is not necessarily the time to pre-announce such a move.

Powell said that the economy made progress but there is still “ground to cover” He insisted that inflation is only transitory and that millions of Americans have yet to return to work. The Fed took its “first deep dive” into the timing of tapering, but decisions will have to wait.

After an initial dollar gain, the currency was sold off as prospects of additional greenbacks flowing to markets sent the dollar down.

  • FOMC : The statement giveth and Powell taketh away
  • Fed Analysis: Powell only takes a baby step toward tapering, why the dollar could dive

What about the virus? The Fed expressed concern by the rapid spread of the Delta variant and counts it as a significant risk to its outlook. However, Powell stressed that with every wave, the economic impact is diminishing.

COVID-19 cases have hit a daily average of 66,000, up from roughly 15,000 in June but below the near 300,000 peak in January. Infections are still on the rise in Europe and bumped up in the UK on Thursday, but hopes from Britain show that the Delta variant can retreat fast.

 Will the dollar extend its decline?

There are reasons to expect a positive mood in markets that would be unfavorable for the greenback.

A bipartisan group of senators reached an agreement on a $1 trillion infrastructure bill. While the legislation has additional hurdles to pass, additional spending by Uncle Sam is positive for the entire world. The risk-on mood may weigh on the safe-haven dollar.

In the shorter term, the focus is on America’s first release of Gross Domestic Product figures for the second quarter. Economists expect a blockbuster figure of 8.6% annualized after 6.4% in the first three months of the year. Investors will eye consumption, investment and also inventories.

Strong growth in the world’s largest economy could also provide hope for the global economy, benefiting the euro among other currencies.

In the old continent, preliminary German inflation figures are set to show an increase while employment figures are forecast to show a reduction in those out of work. The focus is on the US.

 Technical Analysis

EUR/USD hits two-week highs after the Fed, high German inflation

EUR/USD is trading above 1.1850, hitting the highest in two weeks. The dollar is falling across the board after the Fed refrained from pre-announcing tapering and sees inflation as transitory. German CPI beat estimates with 3.8% YoY in July. US GDP is awaited.

 

RURUSD is benefiting from upside momentum on the four-hour chart and has convincingly broken above the 100 Simple Moving Average. It is now tackling the 200 SMA, which is just above the daily high of 1.1863.

The Relative Strength Index is nearing 70 and another upswing could put it in overbought territory.

Above 1.1863 mentioned earlier, the next significant barrier is 1.1880, which held the pair down in mid-July. It is followed by 1.19 and then by 1.1945.

Support awaits at 1.1840, the daily low, and then by 1.1820, 1.1770 and the July trough of 1.1750.

For next week, our technical indicators as shown in the following chart suggest to go Long on the currency pair at or below 1.1840, setting a stop loss at 1.1720, and to Short it at or above 1.1890, setting a stop loss at 1.1960.

EURUSD after our last profit bounced exactly over the weekly support. The price has now broken the descending channel and currently is testing a minor resistance.
According to our technical analysis strategy if the market will break above, it recommends to set a nice long order.

 

As of 02:20 PM (GMT+1), the EURUSD was trading at 1.18810.

 

EUR to USD forecast for tomorrow:  Euro to Dollar forecast on Friday, July, 30: exchange rate 1.1878 Dollars, maximum 1.2056, minimum 1.1700. EUR to USD forecast on Monday, August, 2: exchange rate 1.1896 Dollars, maximum 1.2074, minimum 1.1718. Euro to Dollar forecast on Tuesday, August, 3: exchange rate 1.1930 Dollars, maximum 1.2109, minimum 1.1751. EUR to USD forecast on Wednesday, August, 4: exchange rate 1.1923 Dollars, maximum 1.2102, minimum 1.1744.

 

In 1 week, Euro to Dollar forecast on Thursday, August, 5: exchange rate 1.1901 Dollars, maximum 1.2080, minimum 1.1722. EUR to USD forecast on Friday, August, 6: exchange rate 1.1914 Dollars, maximum 1.2093, minimum 1.1735. Euro to Dollar forecast on Monday, August, 9: exchange rate 1.1894 Dollars, maximum 1.2072, minimum 1.1716. EUR to USD forecast on Tuesday, August, 10: exchange rate 1.1892 Dollars, maximum 1.2070, minimum 1.1714. Euro to Dollar forecast on Wednesday, August, 11: exchange rate 1.1884 Dollars, maximum 1.2062, minimum 1.1706.

 

 

 

 

 

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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