EUR Weekly Forecast: Bearish
- The ECB's message on interest rates is clear.
- Rising tensions in the Middle East are driving near-term market trends.
- Key data releases next week include preliminary Q1 GDP numbers and core PCE.
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The European Central Bank will soon change its monetary policy stance and start cutting interest rates, likely starting at the next ECB Governing Council meeting in June, according to various ECB voting members. After President Lagarde agreed to a June 6 meeting in March, the message from various central bank members since then has been clear and almost unanimous: If inflation continues to fall, interest rates will fall. That's what it was. The June meeting is considered a done deal, and talk has already turned to a second rate cut, with some putting the July meeting on the agenda. This has weighed on the single currency over the past few weeks, and with the Fed expected to cut interest rates much later this year, EUR/USD will struggle to rise.
The recent escalation in the Israeli-Iranian conflict (Israeli drone attack on Isfahan, Iran) has caused a sharp risk-off across markets today, including the USD haven bid. Iran later said it had no “immediate plans” to retaliate and hoped it would bring the two countries back from the brink of full-scale conflict.
US dollar braces for further risk fluctuations as Middle East conflict intensifies
Next week is packed with economic and sentiment data releases, including the latest global PMI releases, as well as first-quarter US GDP and a first look at Core PCE, the Fed's preferred measure of inflation. And to further increase the potential for market volatility, next week will see a number of other heavyweights, including tech giants Microsoft and Alphabet, underdog Tesla, and traditional heavyweights such as General Electric, Ford, Intel, Chevron, and Exxon. Leading companies are scheduled to release reports.
For a detailed list of high-impact data and events, see Real-time DailyFX Economic Calendar
For a detailed list of US quarterly earnings announcements, please visit DailyFX Earnings Calendar
This week's price action suggests that EUR/USD may struggle to break above 1.0700 convincingly. All three simple moving averages are in bearish settings, but the CCI indicator is coming out of oversold territory. Before 1.0600 appears, support is found at the 38.2% Fibonacci retracement of 1.0610.
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EUR/USD daily price chart
According to individual trader data, the long-to-short ratio of traders is 1.97 to 1, with 66.33% of traders being net long. The number of net long traders increased by 2.70% from yesterday and decreased by 3.63% from last week. Traders' net short is 10.03% lower than yesterday and 13.43% higher than last week.
Although we usually take a contrarian view of crowd sentiment, And the fact that traders are net long suggests that the EUR/USD price may continue to fall.
change |
long |
shorts |
OI |
every day | -Ten% | -Four% | -8% |
weekly | -13% | 35% | 0% |
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