Last week, our technical indicators suggested going Long at or below 1.0662, setting a Stop Loss at 1.06, and going Short at or above 1.06625, setting a Stop Loss at 1.07753.

This week, EURUSD price range was 1.0656 high set this past Monday, and 1.0488 low set yesterday, Wednesday. So, Monday, we could have bought the currency pair at 1.06, selling it on an intraday trading at 1.0655, for 0.52% profit. Tuesday, we could have bought it at 1.06, selling it on an intraday trading at 1.061, for an extra 0.09% ROI.

 Fundamental Overview

EURUSD dropped below 1.0500 on Wednesday and came within a touching distance of the 2023-low of 1.0483. Early Thursday, the pair seems to have stabilized above 1.0500, with investors gearing up for key macroeconomic data releases.

The US Treasury bond sell-off continued mid-week as the lack of progress in US budget negotiations caused investors to position themselves for the potential negative impact of a government shutdown on the US credit rating.  “I don’t see the support in the House” for the funding bill presented by the Senate, Republican House Speaker Kevin McCarthy said Wednesday. The next procedural vote on the bill is expected to take place on Thursday.

As a result, US T-bond yields continued to push higher and the US Dollar shined as the go-to safe-haven asset, forcing EURUSD to stay on the back foot.

Technical Analysis

Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), is forecast to decline to 4.6% on a yearly basis in September from 6.1% in August.

Earlier in the day, regional data from Germany confirmed softening price pressures. Annual CPI inflation in Brandenburg fell to 5.6% from 7.1%, while the same figure dropped to 4.7% from 6% in Hesse.

A softer-than-forecast CPI print in Germany could make it difficult for the Euro to stay resilient against its rivals. On the other hand, a stronger-than-expected reading, which is not very likely, could help EURUSD edge higher.

The US economic docket will feature the final revision to the second-quarter Gross Domestic Product (GDP) growth and the weekly Initial Jobless Claims data. Market participant, however, could ignore these data and stay focused on political developments. In case Republicans and Democrats come to terms to avoid a government shutdown ahead of the October 1 deadline, risk flows could dominate financial markets and cause the USD to weaken sharply.

For next week, as illustrated in the following EURUSD chart, the currency pair is experiencing fluctuations as market participants navigate through a landscape of contrasting signals from central banks and economic data. Despite a recent rebound from intraday losses, the pair faces ongoing challenges that stem from both sides of the Atlantic.

Lagarde’s Cautionary Stance

European Central Bank (ECB) President Christine Lagarde’s remarks about keeping interest rates restrictive for an extended period garnered attention. While this declaration was intended to address rising inflation concerns, it also underscored the ECB’s dilemma of balancing price stability with the Eurozone’s uneven domestic economy. This delicate act of balancing appears to be weighing on the euro’s performance against the resurgent US dollar.

Strong US Dollar and Yield Surge

The US Dollar Index (DXY) remains close to its highest level since November, buoyed by a combination of cautious market sentiment and surging US Treasury yields. The 10-year US Treasury note yield has surged to 4.55%, a level unseen since October 2007. This upward trajectory in yields and the resilience of the US economy have contributed to the dollar’s strength.

Federal Reserve’s Hawkish Tone

The expectation of sustained higher interest rates in the US is rooted in the Federal Reserve’s hawkish stance. The central bank has signaled its willingness to implement further interest rate hikes if necessary. This commitment to policy tightening reinforces the appeal of the US dollar as a safe haven in uncertain times.

Shutdown Fears and Political Gridlock

Concerns about a potential federal government shutdown in the US have added to market jitters. Warnings from US President Joe Biden and senior advisers regarding the consequences of a shutdown, including the potential loss of vital benefits for low-income individuals, have stirred apprehension. The political gridlock in Congress, with Republicans proposing significant budget cuts that are likely to be rejected by the Democratic-controlled Senate, raises the specter of a partial government shutdown.

Economic Data Releases Awaited

As investors tread cautiously, attention turns to forthcoming economic data releases. The US Federal Reserve’s favored inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, and the Eurozone’s Core Harmonized Index of Consumer Prices (HICP) are scheduled for release. These datasets are expected to provide valuable insights into inflationary pressures in both economies, potentially influencing trading decisions in the EURUSD pair.

In sum, the EURUSD is navigating a challenging landscape characterized by contrasting central bank policies, surging US Treasury yields, political uncertainty, and upcoming economic data releases. While it has rebounded from intraday losses, ongoing pressures persist. The currency pair’s future trajectory hinges on the ability of market participants to interpret and respond to the ever-evolving signals from both sides of the Atlantic.

To short positions below 1.06600 with targets at 1.0565 & 1.0540 in extension will be our best bet, for next week. Our technical analysis are suggesting going Long at or below 1.0565, setting a Stop Loss at 1.04, and going Short at or above 1.0571, setting a Stop Loss at 1.085.

As of 12:17 PM (GMT+1), the EURUSD was trading at 1.05376.

EUR to USD forecast for tomorrow Euro to US Dollar forecast on Friday, September, 29: exchange rate 1.044 US Dollars, maximum 1.060, minimum 1.028. EUR to USD forecast on Monday, October, 2: exchange rate 1.042 US Dollars, maximum 1.058, minimum 1.026. Euro to US Dollar forecast on Tuesday, October, 3: exchange rate 1.037 US Dollars, maximum 1.053, minimum 1.021. EUR to USD forecast on Wednesday, October, 4: exchange rate 1.035 US Dollars, maximum 1.051, minimum 1.019.

In 1 week, Euro to US Dollar forecast on Thursday, October, 5: exchange rate 1.035 US Dollars, maximum 1.051, minimum 1.019. EUR to USD forecast on Friday, October, 6: exchange rate 1.033 US Dollars, maximum 1.048, minimum 1.018. Euro to US Dollar forecast on Monday, October, 9: exchange rate 1.032 US Dollars, maximum 1.047, minimum 1.017. EUR to USD forecast on Tuesday, October, 10: exchange rate 1.035 US Dollars, maximum 1.051, minimum 1.019. Euro to US Dollar forecast on Wednesday, October, 11: exchange rate 1.037 US Dollars, maximum 1.053, minimum 1.021.

 

Until next article, wishing 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. 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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