Day traders in the EUR/USD likely ran into a costly whipsaw last week if they continued to press ahead with buying positions, this while believing the currency pair had sold off too much and would have to reverse higher. Instead of suddenly sparking sustained momentum higher, the EUR/USD in fact continued to nosedive and went into the weekend near a value of 1.07588. The opening of the EUR/USD will get plenty of attention from Forex traders this week.
While the EUR/USD actually mirrored other major forex pairs teamed against the USD which loss some value last week, the strength of the selling in the EUR/USD certainly raised eyebrows. The ability to drop below the 1.08000 on Thursday and not being able to produce buying on Friday may be a reason for additional concerns among speculators as tomorrow’s trading begins. The 1.08000 level will certainly be watched early.
U.S Jobs Numbers and Fear of the Fed Affecting the EUR/USD
While the U.S jobs numbers via the Non-Farm Employment Change statistics came in near projections, the higher inflation data from the Average Hourly Earnings may have caused a brief storm for Forex and the EUR/USD on Friday. However, most financial institutions are largely gearing their positions towards the U.S Federal Reserve’s FOMC Statement this coming Wednesday. No one is expecting the Fed to raise rates this coming Wednesday, what traders are expecting to hear is a rather neutral stance regarding monetary policy. Many financial institutions have already positioned for a weaker USD over the mid-term.
Some evidence regarding the weaker USD outlook over the mid-term can be seen via the trading in the EUR/USD which did reach a high of nearly 1.10150 on 29th of November. While risk appetite has remained rather optimistic in the broad markets, and U.S Treasury yield spreads have sunk to levels not seen since April of 2022, the EUR/USD has actually struggled. Is it a case of financial institutions believing the EUR had been overbought and thus the reason for the selloff the past week and a half of trading?
Volatility Likely in the EUR/USD this Week for Traders
Traders need to understand the EUR/USD is likely to become volatile this week, and the opening of trading tomorrow and into Tuesday is likely going to be a looking glass into the storm which is going to develop. Speculators not only have to contend with the FOMC Statement via the U.S central bank this coming Wednesday, but they have to be aware financial institutions are going to focus strongly on their outlooks via cash positions, this as the holiday season starts to approach.
- Economic data from the E.U remains lackluster, but that is not a new development, and traders need to likely focus on behavioral sentiment and technical interpretations for the EUR/USD this coming week.
- While the recent selling in the EUR/USD has been strong, mid-term charts show the currency pair is still above important support.
- Day traders need to understand conditions in the EUR/USD may move fast in the coming days if short-term nervousness grows.
EUR/USD Weekly Outlook:
Speculative price range for EUR/USD is 1.06650 to 1.09350
Traders looking for sudden turnarounds in the EUR/USD cannot be blamed, but they should be extremely careful early this week. Incremental selling pressure has been easy to see and if the EUR/USD opens weaker Monday morning, this will not be a solid buying signal. The EUR/USD went into the weekend near its lows for the week, which is another poor sign for the currency pair. If the 1.07200 mark starts to be challenged again, this would be surprising for bullish speculators, but could also indicate additional tests lower may materialize.
If the EUR/USD breaks below the 1.07000 mark this would certainly get the attention of financial institutions, which may still be leaning on the notion the currency pair should be at a higher value mid-term. However, traders without deep pockets cannot rest comfortably with the belief the EUR has been oversold and will eventually move higher. It is the ability to spot immediate trends that most day traders want for quick hitting results. Early this week is certain to see a test of the EUR/USD range. Wednesday’s trading will see the price realms get wider and volatility is guaranteed. Traders will need to be careful. Folks looking for upside may want to see sustained trading above 1.0800 to 1.08150 before they jump onto any potential new trends emerging, particularly if they are conservative.
