Forex Forecast: 31/08 – 04/09/2020
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 long at or above 1.1830 and short it at or above 1.19, setting a stop loss at 1.20. Furthermore, we anticipated further consolidation on the EURUSD between 1.19 and 1.1830. Throughput this week the EUR USD has been trading between 1.1899 and 1.1763. Hence, multiple long trades could have been placed throughout this week. For example, Monday, we could have bought it at 1.1783, selling it Tuesday at 1.1845, realizing 0.53% ROI. Tuesday, we could have bought it at 1.1783, selling it Wednesday at 1.1841, realizing 0.49% ROI. Finally today, Thursday, we could have bought the currency pair at 1.1763, and close it on an intraday trading at 1.1899, profiting an extra 1.16%.
A joyful day for the bulls? Jerome Powell, Chairman of the Federal Reserve, will address the virtual Jackson Hole Symposium and may down the dollar. Tension has been mounting all week and limiting volatility, which may now explode.
Investors expect Powell to introduce a new monetary policy framework which includes Average Inflation Targeting (AIT). That means allowing consumer prices to run hot, compensating for previous shortfalls. As the Fed mostly failed in achieving its 2% inflation target, adopting that new framework would keep interest rates lower for longer, weakening the dollar.
How much of that is already priced in? The dollar’s recent stability indicates that markets are uncertain that Powell will take that path. The response depends on the speech and the details the world’s most powerful central banker provides.
Ahead of the speech, the US releases initial jobless claims, which carry expectations of improving after a disappointing increase over one million last week. The lapse of federal unemployment benefits worth $600/week is weighing on the economy that continues its gradual recovery.
Investors will also eye the second release of Gross Domestic Product figures for the second quarter. A minor upgrade is on the cards following the initial report reading a record drop of 32.9% annualized.
The state of the economy and the stock market also play a role in politics. President Donald Trump is set to deliver his acceptance speech at the Republican National Convention. Protests against social injustice in Wisconsin are competing with the news from the GOP event, but their impact is unclear. Trump has somewhat narrowed the gap with rival Biden.
Coronavirus headlines have been mostly positive.
Markets are shrugging off the increase in European cases and encouraged by the drop in American figures. More importantly, hopes for a vaccine are keeping stocks bid and somewhat weighing on the dollar.
Moderna, a firm based in Massachusetts, said its vaccine candidate triggers a positive response also with the elderly. Further developments may move markets.
Overall, the focus is on the Fed, with some room for other events to impact markets.
EURUSD pares gains as Powell moderates message. EURUSD is trading around 1.18 after a roundtrip toward 1.19. Fed Chair Powell announced a shift toward allowing inflation to overshoot but clarified it would be moderate.
As illustrated in the following chart, the multi-session consolidative range stays unchanged between 1.1750 and 1.1850 on the short-term horizon. Further south of this range should lead to a probable test of the more relevant contention band at 1.1700/1.1690, where coincide monthly lows and a Fibo level (of the 2017-2018 decline). On the flip side, interim hurdle aligns at 1.1916 (August 6 top) ahead of the 2020 high at 1.1965 (August 18).
The bullish view on EURUSD, in the meantime, is expected to remain unchanged as long as the pair trades above the critical 200-day SMA, today at 1.1157.
For next week and as shown in the following EURUSD chart, our technical indicators suggest to go long between 1.18122 and 1.18004, and short it between 1.19287 and 1.18724.
As of 6:02 PM (GMT+1), the EURUSD was trading at 1.1800.
EUR to USD forecast for tomorrow, Euro to Dollar forecast on Friday, August, 28: exchange rate 1.1856 Dollars, maximum 1.2034, minimum 1.1678. EUR to USD forecast on Monday, August, 31: exchange rate 1.1868 Dollars, maximum 1.2046, minimum 1.1690. Euro to Dollar forecast on Tuesday, September, 1: exchange rate 1.1898 Dollars, maximum 1.2076, minimum 1.1720. EUR to USD forecast on Wednesday, September, 2: exchange rate 1.1814 Dollars, maximum 1.1991, minimum 1.1637.
In 1 week, Euro to Dollar forecast on Thursday, September, 3: exchange rate 1.1792 Dollars, maximum 1.1969, minimum 1.1615. EUR to USD forecast on Friday, September, 4: exchange rate 1.1739 Dollars, maximum 1.1915, minimum 1.1563. Euro to Dollar forecast on Monday, September, 7: exchange rate 1.1803 Dollars, maximum 1.1980, minimum 1.1626. EUR to USD forecast on Tuesday, September, 8: exchange rate 1.1824 Dollars, maximum 1.2001, minimum 1.1647. Euro to Dollar forecast on Wednesday, September, 9: exchange rate 1.1849 Dollars, maximum 1.2027, minimum 1.1671.
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.