USDX and EURUSD February-March 2018

In short, the Euro looks ready to surge as high as 1.34 in the coming months, but the ECB is working hard to stop it. Americans say, never trade against the Fed—let’s see if the same applies to the ECB.

■ Market: Foreign Exchange

■ Assets: EURUSD, USD-X

■ EURUSD Today: 1.2350

■ Basic Forecast: EURUSD to range between 1.19-1.26 for several weeks, and then it will move considerably higher, targeting 1.34

■ Trade Signals:

(i) Long Positions if EURUSD retraces to 1.1900, or

(ii) Long positions if EURUSD manages to cross above 1.12600-1.2650 in the weekly chart

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EURUSD OUTLOOK -EU and the US back in a Currency War

There are concerns within the European Central Bank that continued USD weakness could seriously hurt Europe’s economic growth. Meanwhile, the U.S. administration shows no intention of addressing rising inflation. For reference, U.S. GDP is expected to grow at an annualized rate of 4.5% in the first quarter of 2018.

In this context, a new currency war is emerging between the FED and the ECB. Here are the key moves from each side:

□ FED ACTIONS (Goal: Weaken the dollar to boost growth):

(i) Continuing with expansionary fiscal policy, financed through Treasury debt

(ii) Ignoring inflation concerns, despite a recent 2.9% annualized rise in average hourly earnings

(iii) Not addressing the growing U.S. trade deficit

(iv) Confident, with record GDP growth expected in Q1 2018

(v) Threatening more protectionism—The Trump administration imposed tariffs on solar panels in January 2018

□ ECB ACTIONS (Goal: Stop the Euro from rising):

(i) Expressing concerns over Euro volatility (January – Mario Draghi)

(ii) Tactical statements by ECB officials pushing back against USD weakness

(iii) Proposing a full banking union and deeper fiscal integration among EU members

(iv) Continuing money printing, with a long-term inflation target of 2.0%

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EURUSD Technical Analysis

EURUSD has been in a clear bullish trend since April 2017. At that time, it was trading below 1.06—now it stands at 1.2350.

Chart: EURUSD

□ Resistance/Supply Levels:

• 1.2390-1.2420 (medium: 1/5)
• 1.2510-1.2540 (strong: 3/5)
• 1.2590-1.2650 (very strong: 5/5)
• 1.2890-1.2900 (medium: 2/5)
• 1.3400-1.3450 (strong: 3/5)

□ Support/Demand Levels:

• 1.2240-1.2200 (medium: 2/5)
• 1.2070-1.2010 (medium: 1/5)
• 1.1940-1.1900 (medium: 2/5)
• 1.1830-1.1800 (strong: 3/5)
• 1.1730-1.1680 (strong: 3/5)
• 1.1550-1.1500 (very strong: 5/5)

□ Basic Forecast: EURUSD will likely trade between 1.19 and 1.26 for several weeks before moving significantly higher, with a target of 1.34.

As for the US Dollar Index, it’s currently trading near strong support. Today, the USD-X stands at 89.60 points. Key support is between 88.10 and 88.40.

Chart: USD-X (US Dollar Index)

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EURUSD Statistics

Here are the statistics for EURUSD based on 17 years of research by Qexpert.com (G. Protonotarios).

MONTH	RETURN	TIMES (↑)	TIMES (↓)	VOLATILITY
FEBRUARY	-0.23%	9	9	0.83%
MARCH	+0.29%	9	9	0.85%
APRIL	+0.97%	11	7	0.79%
MAY	-0.60%	7	11	0.85%
JUNE	+0.65%	12	6	0.85%

 

 

■ Free Forex Trading Signals: USDX and EURUSD

George Protonotarios, Financial Analyst, » George at Linkedin

for TradingCenter.org (February 14th ,2018)