Forex Forecast: 6 – 10 February 2023

Last week, our technical indicators suggested going Short at or above 1.085, setting a stop loss at 1.1050, and going Long at or below 1.08, setting a stop loss at 1.07.

This week, EURUSD price range was 1.1027 high set today, Thursday, and 1.0802 low set yesterday. So Monday, we could have Short the currency pair at 1.0912, covering it on an intraday trading at 1.0841, for 0.65% profit. Tuesday, we could have Short it at 1.0874, covering it on an intraday trading at 1.0804, for 0.64% profit. Wednesday, we could have Short it at 1.0999, covering it on an intraday trading at 1.0854, for 1.32% profit. Today, we could have Short it at 1.1025, covering it on an intraday trading at 1.0984, for an extra 0.37% ROI.

Fundamental Overview

EURUSD has retreated modestly after having reached its highest level since early April at 1.1033 during the Asian trading hours on Thursday. The pair’s technical outlook points to overbought conditions in the short term but market participants could bet on further Euro strength in case the European Central Bank (ECB) repeats the hawkish message.

The US Dollar came under heavy selling pressure on Wednesday despite FOMC Chairman Jerome Powell’s desperate attempt to convince markets that there will not be a policy pivot in 2023. The Federal Reserve (Fed) announced that it raised its policy rate by 25 basis points (bps) to the range of 4.5-4.75% as expected. In its policy statement, the Fed reiterated that “ongoing increases in the target range will be appropriate,” pointing to at least two more rate hikes in March and May. On a dovish note, the US central bank has changed its language on inflation and noted that inflation “has eased somewhat.”

The initial reaction to the policy statement, the US Dollar managed to hold its ground against its rivals. During the press conference, however, FOMC Chairman Jerome Powell acknowledged that the disinflation process started. Powell further added that a faster-than-expected decline in inflation would play into the policy, triggering a US Dollar selloff.

Later in the session, the ECB is widely expected to raise its policy rate by 50 bps. The decision by itself is largely priced in and is unlikely to receive a significant reaction. Some ECB policymakers have been advocating for one more 50 bps at the next meeting and the Euro could gather strength in case the policy statement or ECB President Christine Lagarde confirms such action.

Additionally, EURUSD could preserve its bullish momentum if the ECB refrains from delivering an optimistic tone regarding the inflation outlook. Markets still think that there is a chance that the ECB could opt for a rate cut later in the year and Lagarde could dismiss that view and help the Euro continue to outperform the US Dollar.

On the other hand, the Euro could lose interest in case Lagarde acknowledges signs of easing price pressures in the Eurozone and leaves the door open to a smaller rate hike at the next meeting depending on economic developments.

Technical Analysis

EURUSD is holding around 1.1000, as buyers keep the reins ahead of the ECB policy decision. The pair is sitting close to the highest level in 10 months, as the US Dollar licks the dovish Fed decision-inflicted wounds. The Euro remains underpinned by hawkish ECB expectations.

EURUSD has pierced through the ascending channel coming from early January after having stayed below it earlier in the week. Moreover, the Relative Strength Index (RSI) indicator on the four-hour chart stays above 70, confirming the pair’s overbought conditions.

On the downside, 1.0980 (former resistance, upper limit of the ascending channel) aligns as initial support ahead of 1.0940 (mid-point of the ascending channel) and 1.0920 (former resistance, static level).

In case the pair extends its rally on a hawkish ECB message, 1.1030 (static level) aligns as interim resistance before 1.1100 (psychological level, static level) and 1.1140 (static level).

For next week, EURUSD has been trading in a bullish trend. In the very short-run, EURUSD is over-bought, so expect some profit taking. Traders should look for high probabilistic zones to get long, until proven otherwise.

Hence, our technical analysis are suggesting going Short at or above 1.09851, setting a stop loss at 1.10918, and going Long at or below 1.08 setting a stop loss at 1.06703.

As of 11:12 AM (GMT), the EURUSD was trading at 1.09852.

EUR to USD forecast for tomorrow: Euro to Dollar forecast on Friday, February, 3: exchange rate 1.1067 Dollars, maximum 1.1233, minimum 1.0901. EUR to USD forecast on Monday, February, 6: exchange rate 1.1070 Dollars, maximum 1.1236, minimum 1.0904. Euro to Dollar forecast on Tuesday, February, 7: exchange rate 1.1071 Dollars, maximum 1.1237, minimum 1.0905. EUR to USD forecast on Wednesday, February, 8: exchange rate 1.1069 Dollars, maximum 1.1235, minimum 1.0903.

In 1 week, Euro to Dollar forecast on Thursday, February, 9: exchange rate 1.1068 Dollars, maximum 1.1234, minimum 1.0902. EUR to USD forecast on Friday, February, 10: exchange rate 1.1129 Dollars, maximum 1.1296, minimum 1.0962. Euro to Dollar forecast on Monday, February, 13: exchange rate 1.1139 Dollars, maximum 1.1306, minimum 1.0972. EUR to USD forecast on Tuesday, February, 14: exchange rate 1.1119 Dollars, maximum 1.1286, minimum 1.0952. Euro to Dollar forecast on Wednesday, February, 15: exchange rate 1.1099 Dollars, maximum 1.1265, minimum 1.0933.

 Until next article, wishing all of you wealthy trading!

 

 

 

 

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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