The EUR/USD remains under pressure and depending on viewpoint can justifiably be claimed to be within a fair market range. The Forex market is always right; the trader is frequently wrong.
Speculators who simply say the EUR/USD has been oversold may be correct over the mid-term, but for the moment bearish headwinds have certainly taken hold.
Narrative regarding the decline of the EUR/USD which closed near 1.13823 this Friday remains debatable too. While some claim that notions of a higher interest rate potentially from the Federal Reserve is a reason, this can be argued. The belief that U.S equity indices have run into headwinds may be an actual more likely reason. No matter what, the EUR/USD remains within lower depths. The currency pair touched the 1.13245 vicinity on Wednesday.
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USD Centric Strength and Broad Global Markets
USD centric buying has been seen across the broad Forex market. The EUR/USD is correlating with other major currency pairs. The selloff in the EUR/USD which began on the 17th of June (when the Fed’s FOMC decision was announced) cannot be argued. The EUR/USD was trading near the 1.16000 realm at that time. The move lower on the day of the Fed’s rate decision has been stark. But the Fed did not raise interest rates then. And previously, the ECB had raised its interest rate.
So again, we return to the idea something else has also factored into the Forex markets. U.S equity indices after touching highs a couple of weeks ago while a circus like environment shadowed per the SpaceX IPO has come and gone. U.S equities have become nervous again. Perhaps some will point to the U.S and Iranian situation, but that has been going on since late February/ early March. And there has also been more reason to be optimistic regarding an agreement with the U.S and Iran.
Reasons for Weaker EUR/USD To be Tested
While things in the Middle East certainly remain fragile regarding the military situation, financial institutions were likely to look elsewhere. The conclusion is that nervous sentiment regarding equities and U.S bond yield strength has been a culprit that can be considered.
The EUR/USD will be tested early on Monday and sentiment remains the key. If risk adverse conditions continue, financial institutions may simply continue looking for safe havens.
While day traders (and even financial institutions) may think the EUR/USD has been oversold, for the time being looking for ambitious moves higher may face a stiff challenge.
The 1.14000 level in the EUR/USD looks cheap, not expensive, but getting there and sustaining the heights has proven tough since last Tuesday and again on Friday for a couple of hours, before stumbling again.
EUR/USD Weekly Outlook:
Speculative price range for EUR/USD is 1.13170 to 1.15100
Speculative traders may be tempted to look for upside. This based on the belief the EUR/USD has oversold and that upper terrain is likely to have more ground to attain than a move to lower depths. However, betting on when and if this is going to happen as always is dangerous. If the saber rattling and military escalation between Iran and the U.S continues to escalate today into Monday, this could spur nervousness in the energy sector again.
This would not help the cause of bullish EUR/USD perspectives. The U.S stock market should be used as a barometer. If the S&P continues to struggle, along with the Nasdaq 100 this could keep the EUR/USD underweight. The 1.14000 mark may prove a very intriguing testing ground early this week, if attained and sustained then it would be a sign financial institutions are positioning for different outcomes based on mid-term sentiment. Bullish traders may even think the 1.15000 level is still attractive, but staying cautious early this week will be important. The U.S stock market may remain the key to the EUR/USD near-term. Risk appetite needs to grow stronger for bullish momentum to be attained.
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