Euro Dollar Forecast: Sell EUR-USD Say the Techs, But PMI Could Boost Shared Currency
- Written by: Gary Howes
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The euro dollar exchange rate has come under pressure this week; the question is whether or not we can expect more of the same.
Monday Update: "EUR-USD is still fluctuating close to 1.38 and this is likely to be the theme for today too, as long as the preliminary eurozone PMIs are in line with expectations (i.e. slightly weaker). However, any upside surprise could potentially provide a boost to the EUR," says Emmanuel Ng at OCBC Bank
The Friday short-term forecast from FuturesTechs suggests weakness in the near-term will likely persist:
- Short Term Trend: Bearish
- Medium Trend: Bullish
- Candlestick Chart says: We broke trend support yesterday and 1.3805 is Marabuzo resistance so we can play this as a short with a stop above there.
- Profile Charts say: Double distribution Trend Day with a Single Print Vacuum between 1.3806 and 1.3812.
- Summary: Downside risk. Would like to see another close below 1.3782 to confirm this.
- Trade Idea: Sell below 1.3782, stop above 1.3815, targets 1.3725 and 1.3670. Low Conviction “Keeper”. Time Stamp: 7.30am.
Don't write the euro off just yet
While the shared currency is likely to feel the heat in the near-term, the longer-term picture appears more positive.
We published a note yesterday from UniCredit which is notable as it is one of the more bullish stances on the shared currency at present.
The bank is forecasting euro dollar as high as 1.5 in the futures, details of which can be found here.
In the near-term there is also the feeling that any euro weakness will likely be limited:
"We expect the euro to fall a little further in the aftermath of the FOMC, but despite the better yield for the last year on the US dollar, we have seen continued euro strength so it is hard to be confident of US dollar strength on the basis of the modest rise in yield spreads seen in the last couple of days," says Jeremy Cook at WorldFirst.
Lloyds Bank Research agree that there could be further declines, but support should be maintained:
"EUR/USD may yet fall a little further in the aftermath of the FOMC, but the correlation between yield spreads and EUR/USD which was so strong last year has largely disappeared this year, so it is hard to be confident of USD strength on the basis of the modest rise in yield spreads seen in the last couple of days.
"There may be more reason for USD optimism based on the improvement in the US current account and basic balance position, as mentioned above, but the Eurozone remains even healthier in this regard as is likely to be emphasised by today’s current account data."