Last week, our technical indicators suggested going Long at or below 1.0787, setting a Stop Loss at 1.0620, and going Short at or above 1.07871, setting a Stop Loss at 1.09.

This week, the EURUSD price range was 1.0885 high, set this past Monday, and 1.0812 low, set today, Thursday. So, on Monday, we could have short the currency pair at 1.0884, covering it on an intraday trading at 1.0855, for 0.27% profit. Tuesday, we could have short it at 1.0875, covering it on an intraday trading at 1.0843, for 0.30% profit. Wednesday, we could have short it at 1.0863, covering it on an intraday trading at 1.0818, for 0.27% profit. Thursday, we could have short it at 1.0844, covering it on an intraday trading at 1.0813, for an extra 0.29% ROI.

Fundamental Overview

The US Dollar (USD) managed to extend its weekly recovery and maintain the risk complex under heightened pressure on Wednesday, dragging EURUSD to fresh five-day lows near the 1.0820 region.

The decent bounce in the Dollar coincided with a generally positive performance in US yields across different durations, as investors continued to anticipate the Federal Reserve (Fed) beginning its easing cycle in September, in contrast to the possibility of the European Central Bank (ECB) initiating interest rate cuts potentially as early as June.

Regarding the Fed, the CME Group’s FedWatch Tool suggests a nearly 62% probability of lower interest rates by September.

Meanwhile, two Federal Reserve officials, President of the Boston Federal Reserve Susan Collins and President of the Federal Reserve Bank of Cleveland Loretta Mester, stated on Tuesday night that they still anticipate a continued decline in inflation. However, they believe the process will take time, and central bankers will need to be patient in deciding when it is appropriate to cut interest rates.

Further support for the continuation of the current Fed’s tight stance came after the FOMC Minutes of the May 1 meeting also highlighted a debate about the restrictiveness of current monetary policy in light of the economy’s strength. This discussion is crucial, as the policy needs to be “sufficiently” restrictive to curb inflation effectively.

In the meantime, the unchanged monetary policy landscape highlights the firm divergence between the Federal Reserve and other G10 central banks, particularly the European Central Bank (ECB).

Regarding the ECB, President Christine Lagarde expressed strong confidence in controlling Eurozone inflation, attributing this to the gradual resolution of the energy crisis and the easing of supply chain bottlenecks.

Looking forward, the relatively subdued economic fundamentals in the Eurozone, coupled with the resilience of the US economy, support the ongoing narrative of Fed-ECB policy divergence and lean towards a stronger Dollar in the longer run, especially considering the rising probability of the ECB reducing rates well before the Fed.

Given this perspective, the potential for further weakness in EUR/USD should be considered in the medium term.

Technical Analysis

EURUSD eased lower on Wednesday after FOMC Meeting Minutes miss the mark.

On the upside, EURUSD is expected to face first resistance at the May top of 1.0894 (May 16), seconded by the March peak of 1.0981 (March 8) and the weekly high of 1.0998 (January 11), all before reaching the key 1.1000 barrier.

In the other direction, a break below the 200-day SMA of 1.0787 could prompt the May low of 1.0649 (May 1) to emerge on the horizon ahead of the 2024 bottom of 1.0601 (April 16) and the November 2023 low of 1.0516 (November 1). Once this zone is cleared, the pair may go for the weekly low of 1.0495 (October 13, 2023), the 2023 bottom of 1.0448 (October 3), and the 1.0400 round milestone.

So far, the following 4-hour chart indicates some correction from recent peaks. That said, there is an immediate uphill challenge at 1.0894, followed by 1.0942. Meanwhile, the initial contention is at 1.0821, followed by 1.0766. The relative strength index (RSI) dropped to around 43.

For next week, the technical outlook of EMA 34.89 after the previous reversal is positive. It is expected that if the upward momentum continues, potential support levels are held by the bulls at 1.0845 and 1.0810 for accumulation before targeting growth at local highs including 1.09450 and 1, 0979 as a target at least as the overall outlook after this breakout is very strong for medium to long-term buyers.

Hence, our technical analysis is suggesting going Long at or below 1.08470 setting a Stop Loss at 1.07877, and going Short at or above 1.08471, setting a Stop Loss at 1.109.

As of 11:42 AM (GMT+1), the EURUSD was trading at 1.08463.

EUR to USD forecast for tomorrow Euro to US Dollar forecast on Thursday, May, 23: exchange rate 1.079 US Dollars, maximum 1.095, minimum 1.063. EUR to USD forecast on Friday, May, 24: exchange rate 1.079 US Dollars, maximum 1.095, minimum 1.063. Euro to US Dollar forecast on Monday, May, 27: exchange rate 1.078 US Dollars, maximum 1.094, minimum 1.062. EUR to USD forecast on Tuesday, May, 28: exchange rate 1.078 US Dollars, maximum 1.094, minimum 1.062.

In 1 week, Euro to US Dollar forecast on Wednesday, May, 29: exchange rate 1.076 US Dollars, maximum 1.092, minimum 1.060. EUR to USD forecast on Thursday, May, 30: exchange rate 1.083 US Dollars, maximum 1.099, minimum 1.067. Euro to US Dollar forecast on Friday, May, 31: exchange rate 1.086 US Dollars, maximum 1.102, minimum 1.070. EUR to USD forecast on Monday, June, 3: exchange rate 1.088 US Dollars, maximum 1.104, minimum 1.072. Euro to US Dollar forecast on Tuesday, June, 4: exchange rate 1.086 US Dollars, maximum 1.102, minimum 1.070.

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.