EUR/USD: Weekly Forecast 6th August

The EUR/USD finished last week’s trading near the 1.10096 mark; this after starting last Monday’s trading around the 1.10250 ratio.  Although the EUR/USD certainly finished the week slightly below its starting point, the currency pair did show the ability to stage a recovery this past Friday before going into the weekend. The EUR/USD hit a mark of nearly 1.09130 on Thursday as financial institutions reacted to nervous sentiment being generated in the broad marketplace, which triggered less risk appetite and a selloff as the USD got stronger globally momentarily.

However, on weaker-than-expected Non-Farm Employment Change data, the EUR/USD did climb on Friday and touched a high of nearly 1.10420 before incrementally selling off the final handful of hours before the weekend began.  The fact the EUR/USD will begin this week’s trading slightly below the start of last week, and having shown an ability to climb upwards on Friday may attract speculative bulls into the EUR/USD early this week, but they should be careful.

European economic results continue to be rather lackluster, and financial institutions are likely not counting on a sudden recovery of growth, but they might believe inflation numbers from the continent will be slightly weaker as consumer power lessens.  The U.S. will publish its Consumer Price Index data this Thursday and the inflation numbers from the States will be watched closely. Some analysts are expecting a slight rise in inflation due to higher energy costs. If the outcome doesn’t prove too strong this might be welcome by financial institutions and spark a reason to pursue buying positions of the EUR/USD.

However, the trend in the EUR/USD has been problematic for bullish speculators. After touching a high of nearly 1.12775 on the 18^th of July, the EUR/USD has faced definite rounds of downward momentum. Traders looking for a sustained reversal higher in the currency pair may find timing the moment the EUR/USD creates an upwards streak difficult to pinpoint. The U.S inflation data late this week will be preceded by E.U data earlier which will affect behavioral sentiment.

• Although Germany Factory Orders were better than expected this past Friday, Industrial Production numbers from the nation are forecast to show a decline this Monday.
• German CPI numbers will come on Tuesday, and EUR/USD might react briefly to this outcome.
• The significant data for the EUR/USD however, will come via the inflation numbers from the U.S. on Thursday and Friday.

The speculative price range for EUR/USD is 1.08910 to 1.11080

The EUR/USD has been rather volatile the past couple of weeks, but this has correlated to the broad Forex market as financial institutions deal with concerns regarding a lack of clarity from global central banks regarding interest rates.  However, speculators may still be leaning towards the notion that the major central banks led by the U.S. Federal Reserve are likely entering the final stages of their aggressive monetary policy. If inflation numbers from Germany and the U.S. this week can show that they have met expectations, this could spark some buying of the EUR/USD, but it is a big ‘if’.

Cautious traders should be careful about the opening of the EUR/USD this week, because of the reversal higher briefly seen on last Friday. Traders should check to see if the 1.10000 ratio can be durable, if this proves to be the case it might spark some buying momentum in the EUR/USD from traders who believe the currency pair has recently been oversold.

The trend of the EUR/USD the past two weeks has been downwards however, and if the 1.10000 is broken lower and the currency pair cannot muster the strength to top the level in the near-term, this would show nervousness is dominating early Forex action and additional tests of support levels could develop. Thursday will be a dynamic day for the EUR/USD based on the U.S CPI results and traders should use their risk management wisely. The past two weeks have produced a large price range for the EUR/USD and this could continue in the coming days.