EUR/USD Rate Week Ahead Forecast: A Powerful Move
- Written by: Gary Howes
-
Image © Adobe Images
Last Friday's 1.0%-plus advance sends a strong signal; the Euro-to-Dollar exchange rate is in the mood to go higher.
We would have to rewind all the way back to November 14, 2023, to witness a bigger daily advance. Back then, the Euro built on the impulsive move to register successive daily gains, and we wonder if the coming days will see similar price action.
If so, then a crack of the 1.0948 resistance point is on tap this week:
Above: Euro-Dollar at daily intervals. The bias is for topside tests this week. Track GBP/EUR with your custom alerts; find out more here
Euro-Dollar trades above its 200-day moving average (DMA) once more, and our Week Ahead Forecast rules say this signals the exchange rate is in an uptrend.
As such, any weakness would be viewed as a buying opportunity ahead of further advances.
The rally could ultimately test 1.10 and then the December 2023 highs at 1.1139, but that peak would be a story for a multi-week timeframe.
When Euro-Dollar last scaled these heights the talk was of rising odds of a Federal Reserve rate cut: back in December 2023 the market was priced for the first cut to fall in March.
Of course, this didn't materialise, and the disappointment fed a strong Dollar rally through H1 of 2024. But fast-forward to August, and the scent of Fed rate cuts is truly in the air.
In fact, a poor run of data has seen increased chat of a potentially outsized 50 basis point rate cut from the Fed in September. Some economists say the Fed could even respond to the disappointing non-farm payroll figures with an inter-meeting rate cut.
"NFP delivers with near-recessionary data. 50bps is now very likely to be the size of the first cut, which will be delivered at the September FOMC meeting (or earlier?)," says Brent Donnelly at AMFX.
This is the kind of discourse that will weigh on the Dollar, offering Euro-Dollar a shot at the early-1.10s.
In the coming week we will be alert for any newswire stories from Federal Reserve policy setters alluding to a need to accelerate rate cuts. This would provide the juice to further gains for the Euro.
