EUR/USD Forecast: "Cracks Starting to Show?"

Euro vs. Dollar

Image © European Central Bank

The EUR/USD exchange rate is seen at 1.1870 in mid-week trade with a four day winning streak having snapped on Tuesday. Analyst and technical forecaster Richard Perry of Hantec Markets says the Euro looks to be at risk of rolling over again.

Are the cracks starting to show in the euro bull run? Positive candles have formed in recent sessions, but they have been relatively muted, and now yesterday’s negative candlestick (with a close towards the session low) shows EUR/USD starting to roll over again.

This time, the resistance at 1.1915 (from last week’s post ECB spike high) has held.

The four month uptrend rises at 1.1815 today but is under pressure.

EURUSD Sept 16

An uptrend breach does not necessarily mean a big sell-off, more immediately that the bulls have lost control.

The lack of drive through momentum indicators reflects this, as Stochastics and MACD lines tail off again.

This is all coming ahead of the FOMC meeting today and it could just be that the market is ranging within 1.1695/1.2010.

The hourly chart shows 1.1810 as the initial support to watch to the downside, whilst 1.1915 is a barrier to gains. Closing either side of these levels will drive the next move.

EURUSD forecasts

Major markets are settling in for a key announcement from the Federal Reserve today. After last week’s rebound (some of which driven by risk-off trading), the dollar has been gradually weakening again in recent sessions.

The perception is that the FOMC will take on board the sentiment from Fed chair Powell’s Jackson Hole speech and adopt a greater tolerance for inflation.

No changes are expected to rates, but will the door be opened to shifting the emphasis of asset purchases? The issues to look for today is how significant changes to the language in the FOMC statement will be.

Also, look for dovish shifts in the dot plot projections of economic forecasts, regarding inflation, growth and unemployment. Expect volatility on yields and the dollar. Signs of potential progress in US Congress over a fiscal relief package.

A $1.5trillion package does not appear to be getting too much agreement anywhere but could pave the way for further talks.

UK inflation has come in slightly ahead of expected in August, even if there was a significant drop.

The UK has avoided the fate of the Eurozone (which went into headline deflation recently). Essentially, all eyes are on the Fed today though.

Today's Calendar

The Fed looms large on the economic calendar today, but retail sales will also be keenly watched. First up though, is the Eurozone Trade Balance at 1000BST which is expected to see the surplus grow to +€19.3bn in July (from +€17.1bn in June).

US Retail Sales are at 1330BST and are expected to show core ex-Autos sales having grown by +0.9% in the month of August (after a +1.9% improvement in July).

The EIA Crude Oil Inventories are at 1530BST and are expected to show a stock build of +2.1m barrels (after a build of +2.0m barrels last week).

The FOMC monetary policy decision is at 1900BST with no change expected to the Fed Funds range of 0.00%/0.25%. The interest will be in how the FOMC accounts for the new average inflation targeting in the statement, and the FOMC dot plots.

Fed chair Powell has his press conference at 1930BST.