EUR/USD: Weekly Forecast 11th June

The EUR/USD went into the weekend experiencing a slight selloff, this after flirting with highs for the week on Thursday.

The EUR/USD finished the week having made rather strong gains. This upwards price action did not come without a fight. The EUR/USD hit a low of nearly 1.06665 on Tuesday and almost challenged the low again on Wednesday. However, a move upwards started to emerge and by Thursday the EUR/USD was trading around a high of almost 1.07875. Yes, the EUR/USD did see a slight selloff before going into the weekend and will start trading tomorrow near the 1.07480 ratios.

Last Thursday’s highs touched values not seen since the 24^th of May, but the EUR/USD does remain within the lower depths of its one-month charts.  The EUR/USD has not been able to gain the momentum of its major counterpart – the GBP/USD technically. The U.S. Federal Reserve will be making its Federal Funds Rate announcement this coming Wednesday and the remarks are highly anticipated.

While the GBP/USD is actually within sight of one-month highs, the EUR/USD is still within the lower depths of its mid-term price range.  Speculators should acknowledge the EUR/USD is being treated cautiously by financial institutions, as other major currency pairs have seen some USD weakness develop to a greater degree. It appears many financial institutions are positioning for a pause in interest rate hikes from the U.S. Federal Reserve on the 14^th of June, but nervousness clearly remains.

• Inflation numbers via the Consumer Price Index from the U.S will be published on Tuesday and the results should be watched.
• The selloff of the EUR/USD going into the weekend signals some nervousness that shadows the outlook of the Fed’s coming rate decision this Wednesday.
• The European Central Bank will hold a Press Conference on Thursday and will certainly react to the U.S central bank’s Federal Funds Rate decision via its own remarks.

The speculative price range for EUR/USD is 1.06500 to 1.08475

The EUR/USD may still be perceived to be oversold by many speculators. The ability of the Forex pair to gain last week likely fueled some bullish optimism regarding the prospects for additional upside price action. However, the selloff going into the weekend showed cautious trading is still dominating the EUR/USD. Early trading this week should be watched to see if the EUR/USD can maintain the 1.073000 realms, if this is accomplished it could signal sentiment is still slightly bullish regarding a near-term outlook.

The prospect of the CPI data from the U.S. on Tuesday and the Federal Reserve on Wednesday should be monitored. A stronger inflation outcome could cause nervousness in the EUR/USD before the Fed speaks on Wednesday, and the EUR/USD could suffer an additional selloff.

If inflation numbers however are weaker than anticipated from the U.S. on Tuesday, this could spark buying of the EUR/USD. Short-term traders need to practice caution early this week and be aware of the potential for violent price action happening if surprises start to hit the markets. The inability of the EUR/USD to sustain prices near 1.07800 is a warning sign that behavioral sentiment remains fragile.

If the Federal Reserve does in fact show increased dovish rhetoric, saying they are not raising interest rates this Wednesday and will take a wait-and-see approach to U.S data this would be a positive for the EUR/USD. However, traders who are betting on the outcome of the Fed’s rhetoric may be safer if they anticipate no rate increase and a cautious outlook warning that inflation is still a detriment that might have to be dealt with again. This could translate into some buying of the EUR/USD and a test of the 1.08000 level and above but also fuel some headwinds limiting upwards momentum.