EUR/USD: forecast for September 21-27
By Elizabeth Belugina
EUR/USD found support at 1.1215 and energetically rebounded to the levels above 1.1400. The weakness of the US dollar as the Federal Reserve has left policy unchanged provides the euro with potential to strengthen to 1.1585 (55-week MA) and 1.1700 (August high). At the same time, the pair ran into the weekly Ichimoku Cloud.
The single currency has to overcome resistance at 1.1467 (May 15 high) so that the bulls could continue pushing it higher. Support levels are at 1.1280, 1.1215, 1.1150 and 1.1100.
Next week for the euro will start with Greek election. The latest opinion polls give no clear winner with Syriza and New Democracy having almost the same support, so there will likely be a coalition government. It is important which party gets more votes, as it will be the one to form a coalition. A coalition led by New Democracy with two smaller parties, which supported the recent bailout, will be the most positive outcome for the euro. The bad scenario will be if Syriza forms coalition government without support of the River and Pasok. In this case, the implementation of bailout will be more complicated. In the worst case, the vote distribution will be so fragmented that 4 parties will have to form coalition or if Syriza will have to turn to anti-bailout parties which want Greece to leave the euro area. All in all, we expect the risks associated with election in Greece to be rather moderate.
Note that the European Central Bank’s president Mario Draghi will speak on Wednesday. It’s clear that the ECB won’t welcome expensive euro, so he may try to talk the European currency down. Also on Wednesday the euro area will release flash manufacturing and services PMI indices. On Thursday the ECB will offer commercial banks cheap loans within its next targeted long-term refinancing operation (TLTRO), though according to the forecasts, bank's demand for iquidity will be low.