Forex Forecast: 22 – 26 February 2021
EURUSD Rates Week in Review
Last week, our technical indicators suggested to go Short on the currency pair at or above 1.2140, and doubling short positions between 1.2190-1.2210. This week, EURUSD price range was 1.2170 high, set this past Tuesday, and 1.2023 low, set yesterday, Wednesday. So, this past Monday, we could have Short it at 1.2144, buying it back at 1.2118, for 0.21% intraday trading profit. Tuesday, we could have short it at 1.2168, covering it yesterday, at 1.2025 for 1.18% ROI.
Americans are off to a shopping spree, but does that make King Dollar unstoppable? The easy answer is that the answer depends on weekly jobless claims, Thursday’s critical data point, but there are other factors to take in into account.
Here are three factors to consider:
1) Stimulus stumbling blocks
President Joe Biden continues pushing through his proposed $1.9 trillion coronavirus relief package and he is running into some reluctance from another Joe. Senator Joe Manchin III is the most conservative Democrat in the upper chamber and he is flexing his muscles. The West Virginia lawmaker opposes approving measures that would violate the “Byrd rule”, which limits any legislation passed by a small majority to strictly budgetary moves.
If Biden gets a smaller package, or any delay, it would push investors back to bonds amid prospects of lower growth and less debt issuance. In turn, softer yields would make the dollar less attractive. All in all, progress on large stimulus is dollar positive and any road bumps would weigh on it.
2) Fed feels optimistic
The Federal Reserve’s meeting minutes from its January meeting showed that the world’s most central bank is upbeat on America’s growth prospects in 2021, more than beforehand. However, the Fed seems unmoved from all the talk about higher inflation and is unlikely to raise rates nor taper its bond-buying scheme. Under these circumstances, the greenback will likely remain under pressure.
3) Shopping but still out of work
EURUSD most recent downward move was triggered by superb US Retail Sales, volume leaped by 5.3% in January, far above expectations. Some of the rise may be attributed to seasonal adjustments which are skewed by the pandemic. On the other hand, there is no doubt that the stimulus checks from the previous package that Congress passed contributed to the boost. Some are concerned that this good news is bad news, as it may lower pressure for stimulus.
However, as both the Fed and the White House know, unemployment remains high, with some ten million Americans still out of work. Weekly jobless claims are set to provide a reminder that the economy is still struggling. While applications have been falling from the highs, levels above 700,000 are still worse than in the peak of the financial crisis.
All in all, there is room for a downside correction in the dollar, at least in the short term.
What about the old continent? In Italy, Prime Minister Mario Draghi has called his fellow citizens to pull together and focused on European integration, music to the euro’s ears. On the other hand, the EU’s vaccination campaign continues advancing at a sluggish pace, despite new deliveries of doses. Fortunately, cases and deaths are falling.
EURUSD has been recovering and is trading above 1.2050 as US Treasury yields retreat. Investors eye US jobless claims on Thursday after Wednesday’s retail sales figures exceeded estimates. News about fiscal stimulus is awaited as well.
Bears have taken over, Euro/Dollar has dropped below 1.2055, which has been serving as a separator of ranges since mid-January. The currency pair is now on the lower side of this critical barrier.
Moreover, momentum on the four-hour chart is to the downside and EURUSD is trading below the 50, 100 and 200 Simple Moving Averages.
The silver lining for the bulls is that the Relative Strength Index is nearing 30, closer to oversold conditions.
Support awaits at 1.2020, the fresh trough, and then by the round 1.20 level. The 2021 bottom of 1.1950 is a critical cushion.
The aforementioned 1.2055 level now switches to resistance, and it is followed by 1.2080 and 1.2115.
EURUSD Price Forecast 2021: Euro-dollar long-term bullish breakout points to 1.2750
For next week, as illustrated in the following EURUSD chart, our technical indicators are suggesting to go Short on the currency pair at or above 1.23, and to go Long at or below 1.1946, as the Euro will be finding liquidity lower, where the institutions could buy more. Remember they still own huge long, and they will want to close them on higher prices.
As of 12:03 PM (GMT), the EURUSD was trading at 1.20705.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, February, 19: exchange rate 1.1982 Dollars, maximum 1.2162, minimum 1.1802. EUR to USD forecast on Monday, February, 22: exchange rate 1.1958 Dollars, maximum 1.2137, minimum 1.1779. Euro to Dollar forecast on Tuesday, February, 23: exchange rate 1.1960 Dollars, maximum 1.2139, minimum 1.1781. EUR to USD forecast on Wednesday, February, 24: exchange rate 1.1954 Dollars, maximum 1.2133, minimum 1.1775.
In 1 week, Euro to Dollar forecast on Thursday, February, 25: exchange rate 1.1966 Dollars, maximum 1.2145, minimum 1.1787. EUR to USD forecast on Friday, February, 26: exchange rate 1.1969 Dollars, maximum 1.2149, minimum 1.1789. Euro to Dollar forecast on Monday, March, 1: exchange rate 1.2036 Dollars, maximum 1.2217, minimum 1.1855. EUR to USD forecast on Tuesday, March, 2: exchange rate 1.2037 Dollars, maximum 1.2218, minimum 1.1856. Euro to Dollar forecast on Wednesday, March, 3: exchange rate 1.2121 Dollars, maximum 1.2303, minimum 1.1939.
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.