Forex Forecast: 21 – 25/09/2020
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 staying short until EURUSD price remains below 50 SMA on an SMA set at 20/50/200, shorting the currency pair at or above 1.1844. So, this past Mondy, we could have shorted the EURUSD on an intraday trading at 1.1889, covering it at 1.1830 for a 0.5% gain. Tuesday, we could have shorted at 1.1901, closing the short position at 1.1839, gaining 0.52%, and today, Thursday, we could have short it at 1.1845, closing the short position at 1.1737 for an extra 0.91% ROI.
The recovery path is uncertain, but the Federal Reserve is unlikely to act anytime soon, which narrative has been weighing on markets and boosting the safe-haven dollar.
The Fed signalled to keep rates around zero through 2023, following through on its new policy to target average inflation. However, investors had already priced in lower borrowing costs for longer and wanted to hear about new stimulus in the short-term rather than only guidance about moves three years from now.
Jerome Powell, Chairman of the Federal Reserve, said that the current level of bond-buying is appropriate, seeming reluctant to inject more cash.
Growth forecasts for 2020 were upgraded to a contraction of only 3.7%, yet the bank also downgraded the 2021 projection to an increase of around 4%. As in previous appearances, the Fed stressed that the recovery depends on the course of the virus and that it is highly uncertain.
EURUSD hit the lowest in a month, but will it continue lower? The answer mostly depends on Congress as Powell also hinted. He said that “My sense is that more fiscal support is likely to be needed” – seemingly indicating that the Fed played its part, also hinting nothing new is coming.
Apart from Powell’s nudge, a new urge to provide more relief comes from disappointing retail sales figures for August. Expenditure increased by only 0.6% while the Control Group used for Gross Domestic Product calculations surprised with a drop of 0.1%.
The fall in spending seems highly correlated with the lapse of various government support programs at the end of July, most notably the $600/week federal top-up to the unemployed. Reports from Capitol Hill suggest Democrats and Republicans are coalescing around a package worth $1.5 trillion.
For investors, the larger and sooner the help from Uncle Sam, the better. The opposition party originally passed a bill worth $3.4 trillion while Republicans recently accepted less than $1 trillion.
See Retail Sales Analysis: Miserable figures good for gold as fiscal help could come sooner
Several economic figures are due out later in the day, most notably weekly jobless claims. Initial applications are for the week ending September 11, which is when Non-Farm Payrolls surveys are held. Economists expect another gradual decline.US building permits, housing starts, and the Philly Fed Manufacturing Index are also out.
Final euro-zone inflation statistics for August are also awaited. They are set to confirm a drop of 0.2% in the headline Consumer Price Index and a minor yearly increase of 0.4% in Core CPI. That may serve a reminder that the European Central Bank may be forced to introduce more stimulus to boost inflation.
Coronavirus cases continue rising in the old continent and have resumed their increase in America. However, investors remain optimistic about the development of vaccines. President Donald Trump said widespread immunization may be available this year, contradicting his top health officials.
Overall, stocks mostly depend on fiscal stimulus to rise and in turn push the dollar lower. Without support from elected officials, EURUSD may extend its downtrend.
EURUSD is suffering from downside momentum as illustrated on the four-hour chart and has dropped below the 50, 100, and 200 Simple Moving Averages.
The Relative Strength Index is nearing 30, thus about to enter oversold conditions implying a bounce.
The critical battle line is 1.1750, which provided support twice in recent weeks. EURUSD breached that level and hit 1.1737, yet the breakout is yet to be confirmed. Further down, 1.17 is another double-bottom to watch, and it is followed by 1.1625.
Some resistance is at 1.1785, a support line from this week and also from earlier in September. It is followed by 1.1830, which provided before the recent fall. Further above, 1.1875 and 1.1920 await euro/dollar.
For next week and as shown in the following EURUSD chart, our technical indicatrors suugest to go long at or below 1.17985, and to short it at or above 1.18426, setting a stop loss at 1.19.
As of 8:22 PM (GMT+1), the EURUSD was trading at 1.1847.
EUR to USD forecast for tomorrow, Euro to Dollar forecast on Friday, September, 18: exchange rate 1.1815 Dollars, maximum 1.1992, minimum 1.1638. EUR to USD forecast on Monday, September, 21: exchange rate 1.1794 Dollars, maximum 1.1971, minimum 1.1617. Euro to Dollar forecast on Tuesday, September, 22: exchange rate 1.1781 Dollars, maximum 1.1958, minimum 1.1604. EUR to USD forecast on Wednesday, September, 23: exchange rate 1.1811 Dollars, maximum 1.1988, minimum 1.1634.
In 1 week, Euro to Dollar forecast on Thursday, September, 24: exchange rate 1.1791 Dollars, maximum 1.1968, minimum 1.1614. EUR to USD forecast on Friday, September, 25: exchange rate 1.1846 Dollars, maximum 1.2024, minimum 1.1668. Euro to Dollar forecast on Monday, September, 28: exchange rate 1.1853 Dollars, maximum 1.2031, minimum 1.1675. EUR to USD forecast on Tuesday, September, 29: exchange rate 1.1832 Dollars, maximum 1.2009, minimum 1.1655. Euro to Dollar forecast on Wednesday, September, 30: exchange rate 1.1815 Dollars, maximum 1.1992, minimum 1.1638.
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.