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Currency Analyst since 2010

EUR/USD: outlook for September 12-18

EUR/USD tested levels above 1.1300 during the past week, but failed to settle at highs.

The single currency strengthened as traders were disappointed by the European Central Bank’s decision not to ease monetary policy. The ECB signaled that it is ready to increase stimulus in future, but gave no hints on exactly what and when it plans to do. As the possibility of the US Federal Reserve lowering rates in September remains low, monetary policy divergence between the ECB and the Fed has weakened and the downward pressure on EUR/USD declined. At the same time, the amount of the market’s net short positions on the euro wasn’t high, so the squeeze of these positions won’t be able to produce sustainable growth of the European currency. If comments of the Fed’s members next week are hawkish, we will actually see lower levels of the pair.   

As for Europe’s economic calendar, the ECB president Mario Draghi will speak on Tuesday. Also watch the release of German and euro area’s ZEW economic sentiment indexes. The region’s industrial production will be published on Wednesday and final inflation and trade balance will be released on Thursday.

The inability of EUR/USD to hold above 100-week MA (currently at 1.1268) means that further growth of the pair will likely be limited: it seems that higher levels of the single currency attract sellers. Support for the pair is provided by the moving averages: 100-day MA just above 1.1200, 50-day and 200-day MAs close to 1.1150.  

 

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