EUR/USD: forecast for March 23-29
The past week brought some correction to EUR/USD. The pair spiked from 1.06/1.07 to 1.1045. Such big move was the result of the fact that the euro is seriously oversold.
The force driving EUR/USD down has diminished on the US dollar part as the expectations of the Federal Reserve’s rate hike moved from June towards September. At the same time, the predominant point of view is still that the pair will continue its slide to the parity in the medium term as the ECB’s massive quantitative easing program pulls down European bond yields and the euro. It’s clear though that the pace of the decline won’t be as rapid as it was. Traders will be aware of the short covering risk and we’ll see more of the sideways trade in the coming weeks.
Next week there will be some news about the state of the euro area’s economy: pay attention to the region’s PMI indexes on Tuesday, German Ifo business climate on Wednesday and German GfK consumer climate on Thursday. Data from the US – inflation figures in particular – will be also very important, because traders will continue adjusting their expectations of the Federal Reserve’s rate hike.
The price chart shows that right after EUR/USD tested the 3.5-month resistance line sellers rushed into new short positions and made the pair quickly retrace much of the advance. It suggests that all attempts of the single currency to push higher will likely be rather weak. The area of 1.0950/1.1000 will provide resistance. Support at 1.0500 may hold for a time being. A decisive break lower will send the pair towards 1.0200.