Weekly Forecast 5th February-11th February

The EUR/USD traversed over the 1.10000 ratio for the first time since April 2022 this past Wednesday, only to finish the week significantly lower near the 1.07925 mark.

Speculative traders who enjoy volatility certainly found their objective in the EUR/USD last week.  This past Wednesday upon the U.S Federal Reserve delivering the anticipated 0.25% increase to the Federal Funds Rate, the USD/EUR soared to a value of 1.10350 a mark not demonstrated since April of 2022. On Thursday the European Central Bank increased its Main Refinancing Rate by an additional 0.50%. All appeared calm and the EUR/USD continued to trade within sight of the 1.10000 vicinities.

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However as Thursday moved on, the EUR/USD began to incrementally get weaker and traded towards the 1.09200 ratio which lingered near going into Friday.  Bullish traders could not have been faulted for believing the lower move in the EUR/USD was a natural market reaction based on the belief some financial institutions may have concluded the currency pair had been overbought in the short term.  Traders may have been betting on an upwards reaction developing on Friday based on the notion the U.S. jobs data would be weaker, but that did not happen.

Vibrant U.S Jobs Data Cast an Immediate Shadow on the EUR/USD

Like thunder loudly booming on Friday, U.S jobs data via the Non-Farm Employment Change statistics fired a strong shot into the Forex market with stronger-than-expected results. The solid hiring by U.S. companies swiftly changed behavioral sentiment in financial trading houses which did not agree with the U.S. Federal Reserve’s cautious outlook regarding inflation. Buying optimism turned into selling chaos abruptly.

Suddenly financial institutions and traders were given economic statistics showing the U.S. economy may be quite vibrant and that inflation remains a legitimate danger. The EUR/USD sold off violently and crashed through 1.09000 easily and then started to test the 1.08300 ratios. And by the end of the day, the EUR/USD went into the weekend near the 1.07925 mark. A booming upwards result in the EUR/USD in the middle of the week, which turned into a loud crash downwards through important support levels.

Short-Term will Test the Stamina of EUR/USD Day Traders

• The beginning of this week’s trading in the USD/EUR should be monitored closely.
• The 1.08000 could play a key role regarding technical behavioral sentiment. If the EUR/USD stays below 1.08000 in the short term it could spur more selling.
• Contrarians who are day traders and continue to believe the bullish movement will reignite in the EUR/USD should be cautious early this week and use solid risk management.

EUR/USD Weekly Outlook:

The speculative price range for EUR/USD is 1.06930 to 1.09710

Having sustained a solid bullish run over the mid-term, the sudden selloff in the EUR/USD likely delivered costly losses for traders caught betting in the wrong direction.  While the 1.10000 mark upwards in the middle of last week was considered quite an accomplishment technically, the ability to spark a downward assault on support levels a day later is a reminder that Forex trading is never easy and can be dangerous. Risk-taking early this week should include watching the results on Monday and Tuesday to see how the EUR/USD reacts to last week’s boom and bust. If the EUR/USD stays below 1.08000 and tests the 1.07500 mark, this may not be surprising considering what happened late last week.

Traders who continue to have bullish sentiment and believe the worst of the selling will come to an end sooner rather than later should practice conservative use of leverage. Last’s week’s swift motor lower in the EUR/USD was fast. The question now is where support levels will begin to prove durable. A move below the 1.07000 ratios would seemingly be considered overdone and possibly spark buying. However, speculators need to use stop losses to protect against more volatility developing.

Speculators looking for an upside reaction and a return to higher price levels should not be overly ambitious. The ability of the EUR/USD to regain buying momentum may prove correct, but the currency pair may remain in nervous choppy conditions in the coming days. If the 1.08000 level is toppled and the 1.08500 can be challenged this would be an optimistic sign, but traders should remain cautious this week as financial institutions deal with last week’s central bank rhetoric and economic data, which will have an effect on the EUR/USD in the days ahead.