Forex Forecast: 27 June – 1 July 2022
EURUSD Rates Week in Review
Last week, our technical indicators suggested to go Long on the currency pair at or below 1.06, setting a Stop Loss at 1.0201, and go Short at or above 1.06300, setting a stop loss at 1.075.
This week, EURUSD price range was 1.0606 high, set yesterday, Wednesday and 1.0468 low, also set yesterday. So, Monday, we could have bought the currency pair at 1.0474, selling it on an intraday trading at 1.0544, for 0.67% profit. Tuesday, we could have bought it at 1.0510, selling it on an intraday trading at 1.0581, for 0.68% profit. Wednesday, we could have bought it at 1.0470, selling it on an intraday trading at 1.0604, for 1.28% profit. Today, Thursday, we could have bought it at 1.0485, covering it on an intraday trading at 1.0579, for an extra 0.9% ROI.
Fundamental Overview
EURUSD has declined sharply in the early European session on Thursday and tested the 1.0500 level. The shared currency is having a difficult time finding demand following the disappointing data releases and the pair could extend its slide in case safe-haven flows dominate the markets in the second half of the day.
The monthly data published by S&P Global revealed on Thursday that the business activity in the private sector grew at a softer pace than expected in early June. The Composite PMI for the Eurozone and Germany fell to 51.9 and 51.3, respectively, from 54.8 and 53.7. In turn, markets are now pricing in a total of 160 basis points European Central Bank (ECB) rate hikes, compared to 170 bps yesterday.
In the second half of the day, S&P Global will release the Manufacturing and Services PMI data for the US as well. In case these surveys remind investors that the US economy remains relatively healthier when compared to the European economy, market participants could continue to price the policy divergence between the ECB and the Fed. In that case, EURUSD is likely to continue to push lower. On the other hand, the dollar could lose interest if the US PMI data come in weaker than expected.
While testifying before the Senate Banking Committee, FOMC Chairman Jerome Powell acknowledged that their rate hikes could cause a recession in the US. On a hawkish note, Powell noted that he would not take any specific size of rate hike “off the table.” Powell will testify before the House Financial Services Committee later in the day but his comments are unlikely to trigger a significant market reaction.
In short, the risk perception should continue to impact the pair’s action on Thursday. Unless there is an apparent positive shift in market mood, EUR/USD is likely to remain under bearish pressure.
Technical Analysis
EURUSD has failed to stage a convincing rebound after having dropped below 1.0500 earlier in the day. The dollar holds its ground as safe-haven flows continue to dominate the financial markets ahead of US PMI data, FOMC Chairman Powell’s testimony.
There is a bearish tilt in the short-term outlook with the Relative Strength Index (RSI) indicator on the four-hour chart dropping below 50. Additionally, the latest four-hour candle closed below the 20-period SMA.
On the downside, 1.0470 (Fibonacci 23.6% retracement of the latest downtrend) aligns as the initial support. In case this level turns into resistance, additional losses toward 1.0400 (psychological level) and 1.0380 (the end-point of the latest downtrend) could be witnessed.
1.0520 (Fibonacci 38.2% retracement) forms first resistance before 1.0560 (Fibonacci 50% retracement) and 1.0580 (100-period SMA, 200-period SMA).
For next week, and as illustrated in the following chart, the currency pair price was trading inside of triangle, and got out of its range, yesterday. Euro fell to support zone to retest it and bounced back. According to our technical indicators, the EUR can make one more move to the support zone, before breaking it. If this will happen, it can signal a new downtrend for the currency pair. Hence, we would go Short on EURUSD at or above 1.05418, setting a Stop Loss at 1.06, and go Long at or below 1.05056, setting a Stop Loss at 1.03.
As of 1:29 PM (GMT), the EURUSD was trading at 1.05120.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, June, 24: exchange rate 1.0599 Dollars, maximum 1.0758, minimum 1.0440. EUR to USD forecast on Monday, June, 27: exchange rate 1.0624 Dollars, maximum 1.0783, minimum 1.0465. Euro to Dollar forecast on Tuesday, June, 28: exchange rate 1.0640 Dollars, maximum 1.0800, minimum 1.0480. EUR to USD forecast on Wednesday, June, 29: exchange rate 1.0582 Dollars, maximum 1.0741, minimum 1.0423.
In 1 week, Euro to Dollar forecast on Thursday, June, 30: exchange rate 1.0687 Dollars, maximum 1.0847, minimum 1.0527. EUR to USD forecast on Friday, July, 1: exchange rate 1.0720 Dollars, maximum 1.0881, minimum 1.0559. Euro to Dollar forecast on Monday, July, 4: exchange rate 1.0727 Dollars, maximum 1.0888, minimum 1.0566. EUR to USD forecast on Tuesday, July, 5: exchange rate 1.0612 Dollars, maximum 1.0771, minimum 1.0453. Euro to Dollar forecast on Wednesday, July, 6: exchange rate 1.0516 Dollars, maximum 1.0674, minimum 1.0358.
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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