This Week's Focus: What can we expect about the EUR / USD?

This Week's Focus: What can we expect about the EUR / USD?


What can we expect about the EUR / USD?
Much has been said about dollar strength on the euro and how they affect the currency pair monetary policies of major central banks.

Currency range by several factors (interest rates, expectations about economic policy, etc.), but the technical analysis can help to put into perspective the current situation and try to guess the key levels.

Therefore, this week will discuss the possible scenarios that can take the EUR / USD, relying on technical analysis.

Technical Analysis
Long-term perspective (monthly)

In the chart above, long-term, the price is within the bearish channel started in 2008. The MACD indicator is still showing bearish, which take us to parity (1 EUR = 1 USD), where the base of the channel coincides channel with very long term. It should be a difficult to break, at least in the first attempts, due to the strength of the supports.

Short-term perspective (daily)

In the short term chart, the price is forming a triangle. Usually represent a continuation figure, therefore bearish, which (met) would lead to the above parity levels.

What macro factors support this hypothesis?
  • Expectations that the monetary policy of the ECB and the Fed are divergent. US may start raising rates before the end of the year, while in the old continent is still injecting massive amounts of money into the system.
  • Uncertainty surrounding geopolitical conflicts as the Russian-Ukrainian and Greece. Favor inflows of money into safe haven (USD), which tends to appreciate.
What might act against our hypothesis?
  • Reversal of the ECB's monetary policy towards less quantitative easing or the Fed decides to postpone the tightening of monetary policy.
  • Less geopolitical uncertainty.
Technically, the EUR / USD invited to think I should continue the downward trend begun in 1.40, to parity, where the strong level above references could act as support. However, as mentioned, at the macro level changes could affect the development of the share price and other exogenous factors.