Last week, our technical indicators suggested going Short at or above 1.10189, setting a Stop Loss at 1.11, and going Long at or below 1.09850, setting a Stop Loss at 1.0850.

This week, EURUSD price range was 1.1092 high set yesterday, Wednesday, and 1.0941 low, set this past Tuesday. So, Monday, we could have short the currency pair at 1.1036, covering it on an intraday trading at 1.0965, for 0.64% profit. Also, Monday, we could have bought it at 1.0965, selling it on an intraday trading at 1.1036, for 0.64% profit.  Tuesday, we could have bought it at 1.0943, selling it on an intraday trading at 1.1007, for 1.1% profit. Wednesday, we could have short it at 1.1090, covering it on an intraday trading at 1.1011, for 0.58% profit.  Thursday, we could have short it at 1.1090, covering it on an intraday trading at 1.1039, for an extra 0.46% ROI.

Fundamental Overview

EURUSD gathered bullish momentum and registered its highest daily close in over a year above 1.1050 on Wednesday. The pair has continued to stretch higher toward 1.1100 early Thursday before going into a consolidation phase.

The European Central Bank (ECB) will announce its policy decisions later in the day and the pair could extend its rally in case the ECB’s outlook highlights a widening policy divergence with the US Federal Reserve (Fed).

On Wednesday, the Fed announced that it raised the policy rate by 25 basis points (bps) to the range of 5-5.25% as expected. In the policy statement, the Fed scrapped the language saying that it “anticipates” further rate increases would be needed. During the post-meeting press conference, FOMC Chairman Jerome Powell refrained from committing to a pause in rate hikes in June and said that they were not planning to cut rates this year. Powell’s comments, however, failed to convince markets and the CME Group FedWatch Tool shows that the probability of another rate hike in June is virtually 0.

The ECB is forecast to raise its key rates by 25 bps. During the month of April, several ECB policymakers noted that they could opt for another 50 bps hike in May but developments since then caused markets to lean toward a smaller rate increase. Earlier this week, the ECB’s Bank Lending Survey revealed the negative impact of high rates on credit demand.

A 50 bps rate hike, which is very unlikely at this moment, would be a significant hawkish surprise and provide a boost to EUR/USD. In case the ECB opts for a 25 bps hike but confirms that they will continue to raise rates in the near future, which should also help the Euro outperform the USD.

On the other hand, the Euro could come under pressure and EUR/USD could stage a deep correction in case the ECB refrains from committing to another rate increase at the next meeting.

Market participants will also pay close attention to the weekly Initial Jobless Claims and the first-quarter Unit Labor Costs data from the US. A big decline in jobless claims alongside a strong wage inflation reading could help the US Dollar find its footing in the short term and limit EUR/USD’s upside.

Technical Analysis

EURUSD declines to 1.1050 area ahead of ECB policy decisions.

EURUSD has lost its bullish momentum and retreated to the 1.1050 area after having climbed toward 1.1100 earlier in the session. The European Central Bank (ECB) is forecasting to raise its key rate by 25 basis points following the May policy meeting.

EURUSD faces initial resistance at 1.1100 (psychological level, static level, mid-point of the ascending regression channel). Once the pair rises above that level and confirms it as support, it could target 1.1160 (static level from March 2022) and 1.1200 (psychological level, static level).

On the downside, 1.1050 (former resistance, static level) aligns as interim support before 1.1025 (lower-limit of the ascending regression channel, 50-period Simple Moving Average (SMA)) and 1.1000 (100-period SMA; psychological level).

 For next week, when last week, the EURUSD price declined to support line, the Euro quickly bounced back, making a strong upward impulse to resistance line. Thereby, Euro entered to triangle and broke $1.0945 and $1.1015, but buyers jumped in again, taking the EURUSD price above its resistance line, at 1.1095, before starting to sell again, inside from the falling channel, and leaving the triangle formation.

We believe bulls will soon lose its strength, and the currency pair should break its support level and continue to fall towards $1.0945 level.

Hence, our technical analysis are suggesting going Short at or above 1.10, setting a Stop Loss at 1.11, and going Long below 1.10, setting a Stop Loss at 1.09.

As of 12:37 PM (GMT+1), the EURUSD was trading at 1.10671.

 EUR to USD forecast for tomorrow: Euro to US Dollar forecast on Friday, May, 5: exchange rate 1.114 US Dollars, maximum 1.131, minimum 1.097. EUR to USD forecast on Monday, May, 8: exchange rate 1.117 US Dollars, maximum 1.134, minimum 1.100. Euro to US Dollar forecast on Tuesday, May, 9: exchange rate 1.113 US Dollars, maximum 1.130, minimum 1.096. EUR to USD forecast on Wednesday, May, 10: exchange rate 1.111 US Dollars, maximum 1.128, minimum 1.094.

 

In 1 week, Euro to US Dollar forecast on Thursday, May, 11: exchange rate 1.110 US Dollars, maximum 1.127, minimum 1.093. EUR to USD forecast on Friday, May, 12: exchange rate 1.117 US Dollars, maximum 1.134, minimum 1.100. Euro to US Dollar forecast on Monday, May, 15: exchange rate 1.110 US Dollars, maximum 1.127, minimum 1.093. EUR to USD forecast on Tuesday, May, 16: exchange rate 1.116 US Dollars, maximum 1.133, minimum 1.099. Euro to US Dollar forecast on Wednesday, May, 17: exchange rate 1.117 US Dollars, maximum 1.134, minimum 1.100.

 

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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