EUR/USD: Weekly Forecast 7th May - 13th May

The EUR/USD continues to present rather volatile conditions as the currency pair shows an ability to reach for higher values, but also produces reversals lower.

Speculators who have pursued the bullish climb of the EUR/USD may be scratching their heads in frustration this weekend. When the EUR/USD opens for trading on Monday the currency pair will be near the 1.10175 ratio, after touching a high which touched the 1.10925 mark on Wednesday, before reversing lower on Thursday and Friday before going into the weekend. The U.S. Federal Reserve helped pushed the EUR/USD higher in the middle of the week when they spoke about a potential pause to interest rate hikes.

However, not all is clear regarding central bank outlooks.  The ECB did raise their Main Refinancing Rate last Thursday as expected by another 0.25%. Yet inflation in Europe and the U.S. remains challenging at best. This week the U.S. will release important Consumer Price Index data and the outcome this Wednesday is certain to cause a reaction in the EUR/USD.  Central banks continue to worry about inflation.

EUR/USD Move Higher is Solid but Shadows are not Making the Upwards Climb Easy for Traders

The ability of the EUR/USD to climb upwards has been significant and the potential of hitting the 1.11000 mark is certainly a target for some traders.  However, the constant reversals which have been rather strong lower are a stark reminder that Forex trading, even in a major Forex pair like the EUR/USD, is not easy and in fact quite complicated.

Financial institutions seemingly anticipated the U.S. Federal Reserve’s interest rate rhetoric and bought into the EUR/USD ahead of FOMC announcements. But concerns regarding the outlook in the near term from the U.S. central bank are still causing mixed reactions, and a bumpy road potentially is ahead for speculators who only want to bet on the EUR/USD moving higher. The move from a high of nearly 1.10900 on Wednesday to a low of nearly 1.09660 on Friday is a solid reminder risk management always needs to be used.

EUR/USD Support may Appear Durable but it is not a Guarantee

  • Traders who remain bullish on the EUR/USD should monitor the U.S CPI data this Wednesday and be careful.
  • A stubborn inflation outcome or a higher-than-expected result could cause the EUR/USD to sell off if the increase causes a big surprise via the statistics.
  • U.S FOMC officials speaking this week should be given attention too, regarding their outlooks for June interest rates, hawkish rhetoric would cause volatility.
  • The EUR/USD price level of 1.10000 will prove important early this week regarding behavioral sentiment.

EUR/USD Weekly Outlook:

The speculative price range for EUR/USD is 1.09410 to 1.11140

The ability of the EUR/USD to continue to press toward the 1.11000 ratio is certainly of interest, but the currency pair’s inability to topple this level is also a warning sign for day traders not to get overly optimistic or create targets that are too high. Volatility remains rather fast in the EUR/USD as the higher price range remains a focal point and financial institutions seemingly wager on the U.S Federal Reserve potentially becoming more dovish at the end of this coming year.

However, the short-term remains troubling regarding the Fed outlook and last week’s rhetoric was cautious from Fed Chairman Jerome Powell. If the EUR/USD falls below the 1.10000 level and struggles to climb above this mark, this could be interpreted as a short-term bearish signal. A challenge to the 1.09800 to 1.09700 would cause nervousness. Any move below 1.09600 to 1.09500 may appear to be too much selling.

Potential moves higher could happen certainly in the EUR/USD, particularly if CPI data from the U.S. this week were to come in weaker than anticipated. If the U.S. inflation numbers in the middle of this week show a decrease, this could spur renewed buying momentum and a challenge to highs seen last week and a possible retest of the 1.11000 ratios.

EUR/USD

Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.