Forex Forecast: 3 – 7 October 2022
EURUSD Rates Week in Review
Last week, our technical indicators suggested to Short the currency pair at or above 0.9809, setting a Stop loss at 1.0056, and Buy it at or below 0.9908, setting a Stop loss at 0.9655.
This week, EURUSD price range was 1.0051 high, set this past Tuesday, and 0.9808 low, set today, Thursday. So, Monday, we could have Short the currency pair at 1.0028, covering it on an intraday trading at 0.9968, for 0.6% profit. Tuesday, we could have Short it at 1.0049, covering it on an intraday trading at 0.9957, for 0.92% profit. Wednesday, we could have Bought it at 0.9815, selling it on an intraday trading at 0.9980, for 1.68% profit. Thursday, we could have Short it at 0.9906, covering it on an intraday trading at 0.9806, for an extra 1.01% ROI.
EURUSD has turned south and declined below 0.9700 early Thursday after having gained more than 100 pips on Wednesday. In order to extend its recovery, the pair needs to rise above 0.9740 and start using that level as support. The broad-based selling pressure surrounding the greenback helped EUR/USD gain traction on Wednesday. The positive shift witnessed in market sentiment weighed on the dollar and the pair managed to stretch higher during the American trading hours. Safe-haven flows, however, started to dominate the market on Thursday, suggesting that yesterday’s market action was an overdue correction. At the time of press, US stock index futures were down between 1.1% and 1.3%, pointing to a risk-averse market atmosphere.
Meanwhile, several European Central Bank (ECB) policymakers noted that they are leaning toward a 75 basis point hike in rates in October, allowing the shared currency to stay resilient against its rivals. ECB Governing Council members Robert Holzmann and Gediminas Simkus both said that a 75 bps increase in rates at the next policy meeting would be appropriate.
On a dovish note, policymaker Mario Centeno argued that a faster increase in rates than warranted may backfire and added that he was not observing a de-anchoring of inflation expectations in the euro area. Investors expect the annual Harmonised Index of Consumer Prices (HICP) in Germany to rise to 10% in September from 8.8% in August. A strong inflation reading in Germany should help the euro hold its ground and vice versa.
In the second half of the day, the US Bureau of Economic Analysis will release its final estimate for the annualized Gross Domestic Product (GDP) growth for the second quarter. Unless there is a significant revision to the GDP reading, markets are likely to ignore that data.
Market participants will keep a close eye on US stocks and if Wall Street’s main indexes suffer heavy losses after the opening bell, the dollar could preserve its strength and make it difficult for EUR/USD to shake off the bearish pressure.
EURUSD has gathered recovery momentum and climbed above 0.9700 during the European trading hours on Thursday. Although the US Dollar Index stays in positive territory, the market expectation for hot German inflation data helps the pair edge higher.
The Relative Strength Index (RSI) indicator on the four-hour chart stays near 50 and EURUSD trades slightly above the 20-period SMA, which is currently located at 0.9635. As long as this level stays intact, the pair could try to stage another rebound.
On the upside, 0.9670 (Fibonacci 23.6% retracement of the latest downtrend) aligns as immediate resistance before 0.9700 (psychological level) and 0.9740 (Fibonacci 38.2% retracement). If the pair manages to stabilize above that last hurdle, sellers could move to the sidelines and open the door for additional gains.
0.9635 (20-period SMA) forms first support before 0.9600 (psychological level) and 0.9550 (static level, the end-point of the downtrend).
For next week, the price of EURUSD has been declining for a while now. The down-trending channel illustrated on the following chart is still in play and the price is trading within its borders.
Currently, the price is sitting on the lower barrier of the channel. Although our general bias remains bearish, both from technical and fundamental perspectives, we believe that a correctional move should follow from here and drive the price to the upper boundary of the channel, which lines up with both the previous level of support now turned into resistance and the 61.8% Fibonacci retracement level. Looking at the historical behavior of the price, we can observe how many times the above mentioned scenario has played out successfully.
Now, it is time to monitor the price development on lower timeframes and looking for entry confirmations. Hence, our Technical analysis are suggesting to go Short on the currency pair at or above 0.9800, setting a Stop loss at 1.0000, and Buy it at or below 0.9800, setting a Stop loss at 0.9600.
As of 14:09 PM (GMT+1), the EURUSD was trading at 0.97045.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, September, 30: exchange rate 0.9870 Dollars, maximum 1.0018, minimum 0.9722. EUR to USD forecast on Monday, October, 3: exchange rate 0.9860 Dollars, maximum 1.0008, minimum 0.9712. Euro to Dollar forecast on Tuesday, October, 4: exchange rate 0.9785 Dollars, maximum 0.9932, minimum 0.9638. EUR to USD forecast on Wednesday, October, 5: exchange rate 0.9635 Dollars, maximum 0.9780, minimum 0.9490.
In 1 week, Euro to Dollar forecast on Thursday, October, 6: exchange rate 0.9631 Dollars, maximum 0.9775, minimum 0.9487. EUR to USD forecast on Friday, October, 7: exchange rate 0.9505 Dollars, maximum 0.9648, minimum 0.9362. Euro to Dollar forecast on Monday, October, 10: exchange rate 0.9452 Dollars, maximum 0.9594, minimum 0.9310. EUR to USD forecast on Tuesday, October, 11: exchange rate 0.9462 Dollars, maximum 0.9604, minimum 0.9320. Euro to Dollar forecast on Wednesday, October, 12: exchange rate 0.9482 Dollars, maximum 0.9624, minimum 0.9340.
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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