Eur/usd - page 506
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EUR/USD forecast for the week of November 14, 2016
The EUR/USD pair rallied at the beginning of the week, but turned right back around after Donald Trump was elected in order to form a very negative candle. We are approaching the 1.08 level, an area that has been massively supportive. If we break through there, the pair should then reach towards the 1.05 level which was massively supportive in the past. I have no interest in buying this pair at the moment, and recognize that quite a bit of selling pressure seems to be found here currently.
EUR/USD Weekly Forecast for November 14-18
EUR/USD declined 2.6% in last week’s trading, as the sharp spike higher mid-week in reaction to the outcome of the U.S. Presidential election was not sustained and the ultimate reaction to Donald Trump winning the presidency was a move higher in the dollar, as increasing inflation is now expected in the U.S., if Trump follows through on boosting public spending.
As a result of the five consecutive losses which have taken place in EUR/USD, the pair is heading into next week testing key support at the October bottom established at 1.08512, which represents a test of the bottom established in late February/early March at 1.08222. Friday’s close, by comparison, was a 1.08519.
The drop to key support coincides with the development of a fully oversold reading on the Stochastic, a price momentum indicator, on both a daily and a weekly basis. Thus, a rebound is possible to start off the week. Signs of stabilization need to take place to suggest a potential basing pattern is under development.
On the upside, resistance is at last Thursday’s high at 1.09536 which corresponds to a 38.2% retracement of the decline from the November 4th peak, excluding the sharp spike in price that took place last Wednesday.
A sustained move above this level is required to suggest a potential bottom may have been established, a development that would leave the target at the 50% retracement of the November sell-off at 1.09856. A failure of an upside reaction to break above Thursday’s high would keep the bias in the pair firmly bearish and suggest a breakdown below key support is likely.
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Euro to Dollar Exchange Rate to Remain Supported by Bond Yield Differentials
After a stellar week for the US Dollar we are told more gains are possible for the currency by Société Generale but importantly that strength may not come against the stubborn Euro.
The EUR/USD may remain insulated to the Dollar’s onslaught, according to the Societe Generale.
The call comes in the bank's most recent foreign exchange forecast briefing to clients made at the end of a week that saw the EUR/USD fall by just over 2.5%.
At most risk of a rising Dollar are emerging market currencies which have benefited for a long time because they have been the only recourse of the yield hungry in a ‘negative yield environment’.
Also likely to fare less-well are the currencies of close neighbours such as MXN and CAD, who will suffer due to the new President’s fiercely protectionist agenda.
“We are bullish on the Dollar against higher-yielding currencies which have benefited from yield-hungry inflows and as long as risk sentiment remains robust we're bullish USD/JPY. EUR/USD is a more complicated story, but may also be a range-bound one, leaving long EUR/JPY (perhaps NOK/JPY and CHF/JPY too) as an attractive trade, but EUR/USD less so,” says Societe Generale's Kit Juckes in a recent note.
The view of a stronger Dollar going forward echoes that held by Commerzbank, as per our note on the matter here.
EUR/USD performed a bearish volte face on election day after it rose to 1.1300 in the initial post-election frenzy, when traders felt the Federal Reserve would delay hking interest rates, before rotating and falling back down as it seemed they might in fact be more likely to hike rates due to Trump’s reflationary stimulus programme.
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The long exhaustion bar seemed to open the way for more losses, but the exchange rate has not fulfilled the bar’s potential, churning and struggling lower to 1.0856 but not quite to the 1.0848 lows.
On the last Friday’s session the EURUSD initially rose but found enough selling pressure around 1.0920 to reverse and closed near the low of the day, also managed to close below Thursday’s low, which suggests a strong bearish momentum.
The pair is trading below the 10, 50 and the 200-day moving average that should act as dynamic resistances.
The key levels to watch are: The 50-day moving average at 1.1076 (resistance), the 10-day moving average at 1.1020 (resistance), a daily resistance at 1.0900, the previous swing low at 1.0851 (support) and 2016 low at 1.0819 (support).