Forex Forecast: 4 – 8 January 2021
EURUSD Rates Week in Review
Last week, our technical indicators suggested to go Long on the currency pair at or below 1.2190, setting a stop loss at 1.21. Throughout this week, the EURUSD traded between 1.2309 and 1.2181. The first opportunity to initiate a Long position in the EURUSD was this past Monday, where we could have bought the currency pait at 1.2183, selling it yesterday, Wednesday at 1.2309, locking in 1.03% ROI.
The EURUSD pair was seen oscillating in a narrow trading band through the first half of the European session and consolidated its recent strong gains to the highest level since April 2018. In the absence of any fresh fundamental catalyst, bulls took a brief pause and refrained from placing fresh bets amid year-end thin trading volumes. That said, sustained selling bias around the US dollar should help limit the downside, rather supports prospects for a further near-term appreciating move.
Investors continued to dump the USD on hopes for a stronger global economic recovery in 2021 and expectations that the Fed will keep interest rates lower for a longer period. Apart from this, the likelihood of additional US financial aid package and regulatory approval of AstraZeneca/Oxford COVID-19 vaccine remained supportive of the underlying bullish tone in the equity markets. This was seen as another factor that further undermined the greenback’s relative safe-haven status.
There is not any major market-moving economic data due for release from the Eurozone. This, in turn, leaves the pair at the mercy of the USD price dynamics. The US economic docket highlights the only release of the usual Initial Weekly Jobless Claims. The data is unlikely to provide any meaningful impetus. However, the broader market risk sentiment might continue to influence the USD price dynamics and assist investors to grab some opportunities on the last trading day of the year.
The EURUSD pair reached a fresh 2020 high of 1.2309 as speculative interest kept selling the greenback heading into the year-end. Euro/dollar hovers around 1.2300 while higher highs are still in sight.
From a technical perspective, the pair this week confirmed a fresh bullish breakout through a symmetrical triangle and seems poised to prolong its recent upward trajectory. However, RSI on the daily chart has moved on the verge of breaking into the overbought territory and warrants some caution for aggressive bullish traders. This makes it prudent to wait for a modest pullback or some near-term consolidation before the next leg up. The next relevant target on the upside is pegged near the 1.2340 level, above which the pair could aim to reclaim the 1.2400 mark in the near-term.
On the flip side, any meaningful pullback might now be seen as a buying opportunity and remain limited near the triangle resistance breakpoint, currently near the 1.2230 region. The mentioned support coincides with another ascending trend-line support, which if broken decisively might prompt some technical selling. The pair might then turn vulnerable to break below the 1.2200 mark and accelerate the corrective slide further towards the 1.2130-25 congestion zone, tested earlier this week.
For next week, as illustrated in the following 4-hour EURUSD chart, our technical analysis indicators appoint a major resistance at 1.24460, and a major support at 1.03929.
Weekly time frame shows price very close to a major weekly resistance cluster or 1.2446.
Further, 2018th structure high will be an important decision point for the pair. At this stage, EURUSD may go either way bullish or bearish.
Technical Bullish argument indicates a major shift in a market trend and initiation of a long term bullish trend on EURUSD. So, we would set a Long position at or below 1.2250, setting a stop loss at 1.2150.
Technical Bearish argument, in case, Resistance is respected, a bearish wave may go all the way down to the 5 years’ weekly support range. So, we would set a Short position at or above 1.23, setting a stop loss at 1.2450.
As of 1:10 PM (GMT), the EURUSD was trading at 1.22734.
EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, January, 1: exchange rate 1.2348 Dollars, maximum 1.2533, minimum 1.2163. EUR to USD forecast on Monday, January, 4: exchange rate 1.2390 Dollars, maximum 1.2576, minimum 1.2204. Euro to Dollar forecast on Tuesday, January, 5: exchange rate 1.2389 Dollars, maximum 1.2575, minimum 1.2203. EUR to USD forecast on Wednesday, January, 6: exchange rate 1.2394 Dollars, maximum 1.2580, minimum 1.2208.
In 1 week, Euro to Dollar forecast on Thursday, January, 7: exchange rate 1.2408 Dollars, maximum 1.2594, minimum 1.2222. EUR to USD forecast on Friday, January, 8: exchange rate 1.2439 Dollars, maximum 1.2626, minimum 1.2252. Euro to Dollar forecast on Monday, January, 11: exchange rate 1.2362 Dollars, maximum 1.2547, minimum 1.2177. EUR to USD forecast on Tuesday, January, 12: exchange rate 1.2356 Dollars, maximum 1.2541, minimum 1.2171. Euro to Dollar forecast on Wednesday, January, 13: exchange rate 1.2332 Dollars, maximum 1.2517, minimum 1.2147.
WISHING ALL OF YOU A HAPPY HOLIDAY SEASON AND A BULLISH NEW YEAR!
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.