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Currency Analyst since 2010

EUR/USD: forecast for January 18-24

 By Elizabeth Belugina

The single currency has been rather stable versus the US dollar in the recent weeks as last month the European Central Bank did less monetary easing than expected. In addition, the euro was supported as a safe haven on the back of Chinese equity turmoil. However, the minutes of the ECB’s December meeting showed that the central bank sees the need to cut deposit rate once again if inflation turns out to be below its already reduced forecasts. One of the reasons of weak inflation in the euro area are the oil prices, which hit 12-year lows.

The ECB will meet once again on Thursday. Although its policy is expected to remain unchanged, the prospect of more easing in March is real. As a result, it may be hard for EUR/USD to break above 1.1000/1.1040. On the downside, we’ll focus on 1.0800, the bottom of the daily Ichimoku Cloud at 1.0760 or even 1.0660 if the ECB is very dovish. All in all, technical indicators are mainly in the neutral state, so pick small profit targets while trading.

Other important events in the euro area’s economic calendar next week include the euro area’s and German ZEW economic sentiment indexes on Tuesday and European manufacturing and services PMIs on Friday.  

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