Exchange Rate Outlook: Weekly forecasts for the Euro vs the British pound sterling and US dollar

For reference's sake:

• The euro dollar exchange rate is 0.22 pct down on Friday night's close at 1.3494.
• The pound dollar exchange rate is unchanged at 1.6140.
• The euro pound exchange rate is 0.22 pct lower at 0.8362.

Euro dollar exchange rate outlook

Shaun Osborne at TD Securities says:

"EUR/USD has traded sideways around the 1.35 area over the past week, consolidating the sharp gains through the low 1.34 resistance zone (now support) seen late the week before.

"The charts are producing some conflicting signals—strong, bull trend versus overbought—over a range of time frames which suggests that while the basic set up here looks constructive (potential bull flag break out above 1.3570), the market looks stretched.

"We think the market will “go with” a move either above 1.3570 or below 1.3465 in the near-term, reflecting the conflicting signals and the lack of conviction in the market at the moment.

"Weekly studies reflect the picture on the short-term charts—bullish trend momentum versus heavily overbought signals on the slow stochastic oscillators.

"The narrow range this week (on no follow through buying interest) leaves the broader picture looking as mixed as the daily chart.

"There is no conviction behind the EUR’s rally, it would seem. A down week next week would be a major negative
for the medium-term picture (major reversal potential on a big net loss) but absent a reversal, the EUR still risks grinding up towards 1.3700/10 having moved above 1.34.

"We still rather think EUR/USD is stuck in a big, broad range—and closer to the top of the range at 1.37 than the lower end (1.27)."

Euro pound exchange rate outlook

Turning to the euro pound exchange rate, Osborne says he remains bearish on the pair:

"EUR/GBP has seen quite a fight between bull and bear pressures evolve over the past week. The initial break below support around the 0.84 level was reversed strongly last week (bullish outside weekly range), suggesting the risk of a big reversal in the recent sell-off in the cross.

"But the GBP has regained the upper hand this week and weekly patterns indicate a “reversal of the reversal” has
played out—this week’s heavy net loss on the week more than offsets last week’s rally (forming a bearish “engulfing line” on the weekly candle chart. We think the broader topping/reversal indications from recent weeks (major double top breakdown, targets a drop to the low 0.80s) remain intact. We remain bearish."