EUR/USD Weekly Forecast: Bullish Trend Gets Tested but Sustains Key Strength – 18 August 2024

The EUR/USD continued to attract more buyers last week, particularly after testing a sudden burst of selling on Thursday, opening the door for positive sentiment to remain optimistic.

-- Perhaps the EUR/USD exchange rate will be perceived to have gained too much strength by some economists who question the positive momentum of the currency pair as the E.U still faces tough challenges with its economy.
-- However, the EUR/USD did finish the week above the 1.10260 mark and this occurred after a sudden spurt downwards on Thursday tested some traders’ fortitude when the currency pair hit the 1.09500 level.
There have been two solid movements higher in the EUR/USD since late June when the currency pair hit depths around 1.06700. And though certainly some reversals have taken place during the bullish move higher in the EUR/USD, it would be hard to argue the direction of the climb. Last week’s high did happen on Wednesday when the EUR/USD came within sight of the 1.10500 barometer. Speculators who have been buying the EUR/USD cautiously and not using overly leveraged positions may have found solid results.

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U.S Economic Data the Crucial Part of the Puzzle for EUR/USD

Technical traders who are scratching their heads and claiming the swing up in the currency pair has been too strong and will eventually run out of momentum may be proven right, but when exactly? Timeframes matter, and the fact is financial institutions are clearly betting on the U.S Federal Reserve to not only cut interest rates in September, but likely being forced into consideration of another Federal Funds Rate cut in November. U.S economic data regarding inflation has been positive, because it has not only stabilized, but is also eroding in some important reports.

The U.S will release its Fed FOMC Meeting Minutes report on Wednesday. This publication will not cause an earthquake but it will be read and looked upon to see why the Fed stayed so cautious during its recent rhetoric which caused widespread bad reactions and market selloffs, particularly in Japan. However, U.S data has recently reconfirmed the notion the Fed has been too cautious and the EUR/USD has gained on the igniting of a new wave of dovish sentiment that financial institutions have regarding the Fed’s outlook. Funny enough, the FOMC Meeting Minutes may not read positive for these dovish thoughts, so this might cause some volatility on Wednesday.

EUR/USD 1.10000 and Sustained Value Levels

There were many financial institutions in June which believed the EUR/USD had been oversold. The 1.08000 mark was seen as pivotal and the ability to fall through this level and actually touch the 1.07000 mark and lower was a dangerous moment. However, speculators who held firm and did not panic may have benefitted from the belief the EUR/USD needed to rise again.

-- The ability in the first week of August and again last week to trade above the 1.10000 level is significant.
-- If the EUR/USD can continue to sustain its value above this mark it will be a solid sign that some bullish sentiment remains.
-- However, speculators may now start to ask if the EUR/USD has been overbought, and they may have a point.
-- Speculators need to be careful and the possibility that the currency pair has now found equilibrium is going to prove dynamic near-term.
EUR/USD Weekly Outlook:Speculative price range for EUR/USD is 1.09700 to 1.10650

Having gained so well, may prove to be a caution sign for speculators of the EUR/USD. If the EUR/USD starts to trade between the 1.09800 to 1.10600 ranges, this would not be a great shock. Financial institutions seemingly have priced two cuts equaling 0.50% into the exchange rate for the EUR/USD based on the Fed’s ability to cut in September and November. This is not too ambitious anymore.

But betting on more than this regarding interest rate cuts could be problematic unless financial institutions get more impetus. If the 1.10000 level is sustained early this week, and higher marks are then challenged it may signal some large players believe the U.S economy will get additional doses of bad reports, but that may not happen this week. Choppy trading may be seen in the near-term as the current highs are tested for strength.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.