EUR/USD Weekly Forecast

EUR/USD Weekly Forecast

● Central bankers repeat their conservative messages as the crisis is far from over.

● Soaring inflation in the US overshadowed tepid macroeconomic data.

● EUR/USD is technically bearish and could pierce the 1.1700 threshold.

The American dollar edged higher in the second week of July, with EUR/USD settling at around 1.1800 after bottoming at 1.1771. Financial markets kept taking hints from central banks and growth-related figures for direction.

More from Powell and Lagarde

US Federal Reserve Chairman Jerome Powell testified before Congress on monetary policy. In his semi-annual presentation, he reiterated that inflationary pressures are likely to be temporary and pledged to maintain the financial support until the economy fully recovers. Powell also said that they would continue to discuss tapering in the upcoming meetings.

European Central Bank President Christine Lagarde also commented on monetary policy. The ECB has decided to be flexible with inflation, announcing that the 2% target is not a ceiling but rather a level around which inflation could oscillate. Lagarde noted that policymakers would need to redefine their forward guidance to align with the strategy review. The central bank aims to avoid tightening too early.

EUR/USD Technical Outlook

The EUR/USD pairs decline has firmed up ever since topping at 1.1974 on July 26. On a weekly basis, the pair has posted a third consecutive week of lower lows and lower highs. The pair has continued to develop below the 61.8% retracement of its March/May rally at 1.1920, heading toward the base of the range at 1.1703.

In the weekly chart, the RSI indicator has extended its slide within negative levels, maintaining its bearish strength. The Momentum indicator turned lower but remains around its midline. The 20 SMA gains bearish traction above the current level, while the longer moving averages remain well below it. All in all, the risk is skewed to the downside.

The pair is developing inside a descendant channel in the daily chart while giving signs of falling further. The 20 SMA heads south above the current level and far below the longer ones, while the 100 SMA crossed below the 200 SMA for the first time in a year. Technical indicators lack directional strength but remain within negative levels.

The immediate support level is 1.1771, a three-month low posted this week. Once below it, the next probable bearish target is the 1.1700 figure, followed by the 1.1620 price zone. An immediate resistance level is located in the 1.1850 price zone, followed by the 1.1920 level.

EUR/USD Sentiment Poll

The FXStreet Forecast Poll shows that market participants are expecting the greenback to extend gains next week. 78% of the polled experts see the pair falling while none sees its advancing. The bearish pressure on EUR/USD eases in the monthly and weekly perspectives, bulls outpace bears, although on average, the pair is seen holding below 1.2000, down from the previous weekly poll.

The Overview chart the dominance of sellers is more clear. The three moving averages accelerated south, while in the three time-frame under study, most targets accumulated below 1.2000. Lower lows are likely, with bears extending the lower end of the range of possible targets.