Weekly forecast for the euro dollar exchange rate: EUR/USD to remain elevated on medium-term bullish momentum
The euro has given away ground at the start of the new week; we see the euro dollar exchange rate trading 0.13 pct down on Friday's close taking the rate to 1.3786.
The exchange rate touched the low 1.38's at the close of last week area today; the high of the year and a pinpoint test of the bull channel in place since the start of Q3.
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"Trend momentum signals remain bullishly aligned across a range of timeframes but, with trend channel resistance holding, the slow stochastic studies into overbought territory and daily price action signalling a stall (doji candle), near-term risks are perhaps shifting towards a modest correction in the short-term," says Shaun Osborne at TD Securities in a weekly exchange rate forecast note to clients.
TD Securities spot key short-term support at 1.3645/50, though the former 2013 high at 1.3710 may provide some short-term, psychological under pinning as well.
"There is no clear sign here that a major peak is near but we think we need to be alert to the risk of a correction, especially considering the mostly one-way price action seen in this market since September," says Osborne.
The euro dollar rate's extension higher over the past week reflects a well-entrenched bull trend in the market, "demonstrated by the bullish alignment of the DMI oscillator across the short, medium and long-term charts. This sort of situation typically reflects a sustained trend in a market that will be subject to limited corrections only," says Osborne.
Accordingly, having cracked the former 2013 high, there is little to suggest that the market will not continue to progress towards the 1.40 area now (potential trend resistance off all time and 2011 highs).
1.4 should cap gains
Confirming that the medium-term forecast is one that favours the euro is Luc Luyet at MIG Bank:
"The medium-term bullish momentum remains strong as can be seen by the fresh multi-month highs. However, the increasing overbought
conditions and the key resistance area given by the long-term declining trendline (around 1.3970) and the psychological threshold at 1.4000 should put a cap to the medium-term upside potential."
Emmanuel Ng at OCBC says he is forecasting a maximum of 1.3850 being achieved:
"Despite the disappointing Oct German Ifo, the EUR-USD managed to stay aloft while the ECB’s Asmussen displayed little discomfort towards the EUR’s levels. Going ahead, amid the fairly busy data calendar this week, look also to the slew of Oct confidence indicators on Wednesday for further cues.
"In the near term, upside progress may be somewhat guarded with chatter of a technical fatigue coupled with suspicions that policy makers may begin to be slightly uncomfortable with the EUR’s valuation. Expect resistance towards 1.3835 and then 1.3850 while 1.3770 may provide initial support."