On early Monday of this past week the EUR/USD challenged the 1.15000 mark as nervousness swept through the broad markets, particularly as the previous week’s trading showed risk adverse conditions taking hold in U.S equity markets.
On Wednesday of this past week U.S inflation data proved strong and the EUR/USD which had seen a reversal upwards after Monday’s lows sank once again and tested the 1.15260 vicinity. Thursday’s trading opened with another dose of stronger selling happened as the U.S military engaged in Iran again.
The week’s trading in the EUR/USD was certainly not done and another shift began. Thursday’s increase by the ECB of the Main Refinancing Rate to 2.40% didn’t surprise anyone, but the EUR/USD did climb. A high of nearly 1.15900 was tested. On Friday the same high was tested, but the currency pair went into this weekend around 1.15669, this as President Trump was once again proclaimed an Iranian agreement was near, and importantly the U.S stock markets survived the SpaceX IPO.
EUR/USD Open to Perceptions and Different Narratives
The ability of the EUR/USD to finish the week’s trading sustaining value near short-term highs may be looked on positively, but anxiousness remains a fixture in the Forex market. The U.S Fed will announce their interest rate decision this coming Wednesday. While many analysts are predicting an interest rate hike from the Fed, others are not. I for what it is worth do not think the Fed will raise its Federal Funds Rate this coming Wednesday, but we shall see.
The EUR/USD actually remains within its lower mid-term price range. Day traders have some potentially dangerous speculative opportunities ahead of themselves this coming week. Narratives are offering all types of viewpoints, so again take mine as just another opinion being sounded. If the Federal Reserve doesn’t raise its interest rate this coming Wednesday, and if U.S equities show some consistency and do not suffer strong selloffs the EUR/USD could climb in the coming days. That is a lot of ‘ifs’ I know. If the opposite happens then the EUR/USD could stay grounded – and move lower - for the time being.
Risk Appetite Tests are Coming for Financial Institutions
While financial institutions may be breathing easier because U.S equity indices showed some calm the past couple of trading sessions and went into the weekend somewhat politely, fears are still being expressed by many large market participants.
If selling on indices is seen, this could translate into a stronger USD centric stance again.
A lot of winds are blowing and they are creating confusion for large players who may still want the safety of U.S Treasury yields in the near-time as they try to figure out their mid-term outlooks.
EUR/USD Weekly Outlook:
Speculative price range for EUR/USD is 1.15425 to 1.17100
The EUR/USD may continue to look oversold, but betting on upwards momentum to suddenly spike remains speculative. The U.S Fed needs to keep their interest rate in place on Wednesday for the EUR/USD to build momentum it would seem, but will that occur? And too, the Iranian saga still shadows the markets, even though President Trump is proclaiming an agreement is near – again, we have heard this before.
Day traders the past handful of months have seen plenty of volatility, and it is not finished yet. Establishing a trend in the EUR/USD has been difficult for upside wagers and a move upwards with solid momentum still may not be within reach. The EUR/USD under the 1.16000 appears oversold and large players may view it as such. However, positive, impetus needs to come from a variety of places for the EUR/USD to gain enough influence to look attractive as a buying wager. Skittish reactions and sudden sentiment shifts remain a threat in the coming days. Buyers of the EUR/USD may be proven too optimistic, but wagering on upside to develop might be worthwhile bet.
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