Image Source: Unsplash

• Since touching highs around the 1.18400 level on July 1, the EUR/USD currency pair has seen a sharp move lower on the one-month technical chart.
• However, day traders have likely tried to catch movements higher based on the notion the EUR/USD pair has also been oversold the past few weeks.
• Yet, the storm clouds that have gathered over the Forex space, including the EUR/USD pair, have not cleared. In fact, the outlook has only become more murky.
• This past week saw a surge higher in the EUR/USD pair, which challenged the 1.17225 vicinity, only to falter quickly and fall to the 1.16200 level in a short time.
• Day traders need to understand the level of nervousness in financial institutions has increased. There is also a notion that the US dollar-centric weakness that cascaded from early April into late June was overdone.

ECB and Fed in the Spotlight

The ECB will meet this week and announce their interest rate decision, but they will not change their Refinancing Rate. In fact, the European Central Bank will likely sound cautious. This will be a reflection per their discussions with the U.S Fed which will make their FOMC interest rate decision in the following week.

There are a large amount of shadows that are engulfing the U.S Federal Reserve at this moment. President Trump clearly does not agree with the interest rate policy of the Fed. However, Jerome Powell doesn’t seem to mind proclaiming his belief the U.S economy is in an uncertain period.

Traders tired of tariff talks and interest rate considerations cannot be blamed. But technically the EUR/USD currency pair, after having attained highs in early July, has seen a bearish retreat, and the ability of the currency pair to see sustained trading below the 1.17000 mark is rather interesting.

Near- and mid-term outlooks for the EUR/USD currency pair are likely going to continue colliding, and this will lead to additional choppiness. Traders need to understand that the next two weeks of Forex price action are likely going to be periodically volatile.

Caution Desired but Outlook is Speculative

The EUR/USD pair's one- and three-month charts have rather favorable price action. Both charts still show the potential for a rather bullish move higher for the EUR/USD, and this may be important to keep in mind.

• Yes, the EUR/USD pair has sold off incrementally over the past few weeks, but financial institutions are still likely leaning into notions of a weaker US dollar mid-term.
• The EUR/USD cross is almost within a rather desirable trading ground for speculators to test where the shifts are going to develop next in Forex.
• The U.S economy has shown some signs of strength recently via retail sales and a solid manufacturing report from the Philly Fed.
• If the U.S inflation story remains at the forefront, the Fed will continue to be pestered by the White House to lower interest rates. But will Jerome Powell show any signs of helping the White House in a week and a half?

EUR/USD Weekly Outlook: Speculative Price Range is 1.15875 to 1.17300

Having fallen well below the 1.17000 level, the EUR/USD currency pair may look more attractive to bulls who believe the pair has more room to rise from that point. In other words, the recent price of the EUR/USD pair has been battling short-term lower marks while nervousness in financial houses remains. The lack of clarity will continue this week, and this will only lead to volatility.

Day traders will need to be cautious in the Forex space and the EUR/USD currency pair in particular. A major test of sentiment will continue to be seen because of President Trump’s rather blustery rhetoric regarding the U.S Fed and tariffs. The White House will try to put a positive spin on all possibilities, but financial institutions will want to see evidence that calm will return.

The EUR/USD pair does look to be oversold in its territory, but day traders looking for upside should be cautious and practice solid risk management. If new lows are produced and the EUR/USD falls below the 1.16000 mark in a sustained manner, such a move would tempt more buyers, but it would also be an indication that short-term sentiment remains extremely risk-adverse.

More By This Author:

WTI Crude Oil Weekly Forecast: Name Of Game For Traders Is The Value Range
USD/BRL Analysis: Trading Volatility Rises As Trump Focuses On Brazil
Nasdaq 100 Analysis: New Altitudes As Speculative Buying Fuels Highs