Forex Forecast: 30/11 – 04/12/2020
How to use the basic technical analysis concepts we have shared with you to predict the next week’s currency pair price movement
EURUSD Rates Week in Review
Last week, our technical indicators suggested to go short on the currency pair at or above 1.1846, setting a stop loss at 1.1918, and to go long at or below 1.16258. Throughout this week, the EURUSD price range was between 1.1941 and 1.18. So this past Monday, we could have short the EURUSD on a intraday trading at 1.1906, covering it at 1.18, realizing 0.89% ROI. Tuesday, we could have short it at 1.1897, covering it on a intraday trading at 1.1837, for 0.5% gain. Wednesday, we could have short it on a intraday trading at 1.1931, covering it at 1.1882, for a 0.41% profit, and today Thursday, we could have short it at 1.1941, closing the short position at 1.1885 for an extra 0.8% ROI.
How low can the dollar go? The greenback has been hit by three factors, but the euro also has its own reasons to fall and EURUSD’s ascent to the highest since September may suffer a setback.
Why the dollar is down
1) Fed warming up the printing presses: The Federal Reserve’s Meeting Minutes from early November showed that members dedicated a significant amount of time to discussing the Quantitative Easing (QE) program. The world’s most powerful central bank conveyed calm and imminent urge to provide more support, but it is gradually moving in that direction. At least in the US, creating new money devalues the currency.
2) Short-term data is worrying: Ahead of the Thanksgiving holiday, the US released a big bulk of economic figures. The impressive increase in October’s Durable Goods Orders encouraged markets and so did another robust housing figure. However, the back-to-back increase in jobless claims – seen for the first time in July – signals the labour market’s recovery is hitting its limits. After the dust settled from the massive data dump, the downbeat narrative took hold.
3) Coronavirus ravages the US: Another day, another COVID-19 hospitalization peak, for the 16th consecutive time. Infections remain at an elevated level and mortalities are nearing the heights seen in the spring. Thanksgiving travel can further exacerbate the situation and contribute to spreading the illness.
These factors pushed EURUSD to nearly 1.1950 at the time of writing. However, the time may be ripe for a correction.
Fundamental factors that could trigger a EURUSD fall
1) Minutes across the pond: It is now the European Central Bank’s turn to release its meeting minutes. The protocols will likely reiterate the ECB’s concerns about the impact of the virus on the economy and signal the upcoming monetary stimulus.
An expansion of QE is expected, but the size is unclear. Moreover, the Frankfurt-based institution may also opt for cutting rates, an option that has never been denied. While printing Euros has helped the common currency in Covid times, slashing borrowing costs has hurt it.
2) Germany is struggling with the virus: The old continent’s largest economy is set to impose new restrictions, contrary to the trend in France and Spain, which have bent the case curve. Chancellor Angela Merkel said that COVID-19 infections are still too high and that more action is needed to rein in the spread. Any slowdown in the “locomotive” would also hamstring the euro’s gains.
The Relative Strength Index on the four-hour chart is nearing the 70 level, reflecting overbought conditions, from where it is technically prone to a downside correction. Moreover, upside momentum remains relatively weak.
The fresh high of 1.1940 is the first resistance line. It is followed by 1.1965, which was a swing high in the summer. The yearly peak of 1.2010 is the next upside target.
Support awaits at 1.1920, which was a peak in early November. It is followed by 1.1895, a double-top in the middle of the month. Further down, 1.1850 and 1.1815 await the pair.
For next week, as illustrated in the following 4-hour chart, the EURUSD price has broken through the upper line (resistance line) of the channel in which it has been moving since the end of July, which is now at a strong resistance line. This line was formed in November 2019, but it has had a particular influence on the price since the beginning of October. Over the past month, the price has not been able to rise once, above this line (there were minimal breakouts). Hence and as illustrated in the EURUSD 4-hour chart, our technical indicators are suggesting to go short on the currency pair at or above 1.18991, setting a stop loss at 1.19834, and to go long at or below 1.17.
As of 1:27 PM (GMT), the EURUSD was trading at 1.19.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, November, 27: exchange rate 1.1931 Dollars, maximum 1.2110, minimum 1.1752. EUR to USD forecast on Monday, November, 30: exchange rate 1.1988 Dollars, maximum 1.2168, minimum 1.1808. Euro to Dollar forecast on Tuesday, December, 1: exchange rate 1.1975 Dollars, maximum 1.2155, minimum 1.1795. EUR to USD forecast on Wednesday, December, 2: exchange rate 1.1958 Dollars, maximum 1.2137, minimum 1.1779.
In 1 week, Euro to Dollar forecast on Thursday, December, 3: exchange rate 1.1975 Dollars, maximum 1.2155, minimum 1.1795. EUR to USD forecast on Friday, December, 4: exchange rate 1.1967 Dollars, maximum 1.2147, minimum 1.1787. Euro to Dollar forecast on Monday, December, 7: exchange rate 1.1972 Dollars, maximum 1.2152, minimum 1.1792. EUR to USD forecast on Tuesday, December, 8: exchange rate 1.1995 Dollars, maximum 1.2175, minimum 1.1815. Euro to Dollar forecast on Wednesday, December, 9: exchange rate 1.2021 Dollars, maximum 1.2201, minimum 1.1841.
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 nor KeySoft. 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 the future performance of the EUR/USD.