Outlook / Predictions for the Euro versus US dollar Exchange Rate: Euro has the upper hand
- The euro dollar exchange rate is currently 0.42 pct up on Monday night's closing rate hitting 1.3116 at 14:30 on Tuesday.
- The euro pound exchange rate is 0.5 pct higher at 0.8695.
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The EUR is trading higher along with the rest of the majors against the USD this morning, despite a German ZEW survey that was more negative overall.
Concerning the outlook for the euro and US dollar, Shaun Osborne at TD Securities says:
"Like the rest of the currency space, the direction for EUR-USD should focus on the USD side of the equation in the coming sessions, with plenty of potential catalysts through the rest of the day and a keen focus on Bernanke tomorrow.
"On the charts, EUR-USD’s rally above 1.31 overnight is bullish sign that adds to the long lower shadows on the daily candles from Friday and Monday. Resistance above spot now looks to last week’s high of 1.3196, while a retracement lower should find significant support at 1.3000."
Mathew Weller at GFT has said he is predicting the euro to rally further based on his identification of a bullish Engulfing Candle pattern:
"The EUR/USD broke out higher from its descending triangle pattern yesterday, and rates have since rallied above 1.3100. The topside breakout means that the sell trade from yesterday’s Candlestick Daily report is now invalidated, so readers should be looking to cancel those orders. In fact, the recent 4hr Bullish Engulfing Candle suggests rates may continue to rally toward last week’s post-Bernanke highs at 1.3200. In the short-term, we’re watching resistance at 1.3131 (the central Monthly Pivot Point), but a break through that ceiling would expose 1.3200 next."
Bullish Engulfing Candle - Why is this significant? A Bullish Engulfing candle is formed when the candle breaks below the low of the previous time period before buyers step in and push rates up to close above the high of the previous time period. It indicates that the buyers have wrested control of the market from the sellers.
RoboForex give their predictions for the euro versus US dollar based on an analysis of fibonacci chart patterns:
"Euro is still being corrected (higher), after making a rapid ascending movement last week. We can’t exclude a possibility that the price may continue moving upwards to reach the next target at the level of 78.6% (1.328) - in addition to that, the bulls may face the resistance form the 2.618 line of the fibo-channel."
What to expect from today's US economic data
As mentioned earlier, for the euro dollar exchange rate, the US dollar is the important part of the equation.
Movements in the US dollar will likely see an increase in volatility as we move through the US session.
Osborne says:
"There is a plethora of data and earnings today. We are in line with consensus expecting headline CPI to rise from 1.4% to 1.7% y/y on higher gasoline prices, though see upside risks for core, which may remain flat at 1.7% y/y rather than ease back to 1.6%.
"We’ll also have the monthly TIC flows data for May, IP for June, and the July NAHB Housing Market Index, where we see upside risks to consensus for the latter two."
Tomorrow it is all about Bernanke
The big news for currency markets will however be borne out on Wednesday.
"Bernanke’s comments in front of Congress later this week will lean dovish are pressuring the USD—though, in essence, we expect a repeat of what policy makers have been suggesting for a while now—tapering is likely to start later this year but that interest rate increases (i.e. a tightening in monetary policy) is a long way off still," says Osborne.