EUR/USD: forecast for August 24-30
By Elizabeth Belugina
The past week was eventful for the euro area and especially for Greece. International creditors agreed to provide the nation with 86-billion euro bailout. Greece will be getting the money within the next 3 years. In return, Greek authorities will have to raise taxes and cut spending. Greece got the first 26-billion tranche on Thursday: 10 billion will be used to recapitalize the banks, while about 3 billion were repaid to the ECB.
In the near term, we will see plenty of political news from Greece. Greek Prime Minister Alexis Tsipras resigned because of a rebellion in his leftist Syriza party. Tsipras now aims to take part in the snap parliamentary elections reported on September 20 in order to strengthen his hold on power. For now, the market views the resignation of Tsipras as positive for the euro believing that it could facilitate the negotiations with the European authorities. For now, under the Greek constitution, the three largest parties will try to form a temporary government – this process may be rather difficult.
EUR/USD jumped towards 1.1300 as the less hawkish Federal Reserve’s meeting minutes. The single currency is used as a refuge as capital is flying from emerging markets. Safe haven demand will keep the euro supported until there are better economic data coming from the US and China. As a result, we recommend being very cautious with short positions next week. Buying on the dips will be better as a short-term strategy.
Next week there will not be many important economic releases in the euro area, except German Ifo business climate on Tuesday. In addition, pay attention to the meeting of the global monetary authorities in Jackson Hole.
Resistance is at 1.1340 (200-day MA), 1.1380 and 1.1430/67. Support is located at 1.1215, 1.1130/00, 1.1075 and 1.1015.