EURUSD Monthly Forecast & Analysis – 14th May 2022

Introduction

The Euro sentiment is on a downward trajectory since the last report showed a negative outcome when the result dropped from 54.30 to -39.30 as of March 2022, based on the economic sentiment report. The online brokers in South Africa will be paying attention to the next ZEW report and the ECB chairperson statement that will be released during the trading week.

EURO and US News

ZEW Economic Sentiment

A survey was carried out among 274 German Institutional investors who analyze the economic condition in the European zones. If the indication of the data is above 0.0 indicates optimism for the European zone while a below 0.0 indicates pessimism. 

Therefore, ZEW focuses on the German economy, and it is a leading indicator of the economic health of the zones and the outcome can be an early signal of the future economic activity in the Eurozone.

The forecast is -42.0 while the previous is -43.0

Core PPI m/m

The report for final demand is based on the changes in the cost of services and finished goods that the producers sold within a certain period. This calculation excludes food and energy. 

Therefore, if the report is greater than the expected outcome it is good for the currency but a lower outcome is not suitable for the currency. The food and energy make up to 40% of the overall goods of PI which tends mute the importance of the core data

The previous data was 1.0% while the forecast is 0.6%.

EURUSD Technical Analysis

EURUSD: Monthly Chart Objective: Down Trend Buildups 

Monthly Resistance   1.2300, 1.18500.

Monthly Support levels 1.15000, 1.15500.

The short position online brokers who had an open position from the beginning of the year 2022 and have made profit above 9000 points from the forex chart if you calculate the bearish run from the high of 1.14860 down to the low of 1.05106.

The forex market will continue to see the bears dominate the market because of the weak indices from the European zones and the high level of inflation around the zone. The price of the EURUSD pair has gone below the pre-pandemic month of 2020 as the price pushes into the low of 2017. If the Bears can close below the support levels of 1.03213 the price may drop lower to find a new support level. 

However, if the support is not broken, the price may push from the support zone of 2017 if the Bulls can overturn the Bears’ pressures around the zones.

Weekly Chart Down Trend

Weekly Resistance levels 1.16650, 1.19150

Weekly Support levels 1.15230, 1.16720

The CPI report will be released during the trading week, it will give the monetary policymakers information about the purchasing power of the consumers and the level of inflation in the economy. Traders will be paying attention to the Fed’s response in controlling the levels of inflation when the CPI report is out. 

The Doji candlestick shows that the market participants and online brokers closed the previous week with indecision because the price is entering a zone it has not tested for years. The 2017 support levels of 1.04870 and 1.04520 have not been tested for a while and we may get a breakout below the zone or we see a reversal technically from the zone.

Daily Chart Projections: Downtrend 

Daily Resistance Levels 1.19150, 1.17500

Daily Support levels 1.14500, 1.13000, 1.15460

The EURUSD pair is consolidating after the price dropped towards the low of 2017 for the first time in 5 years. The trend remains bearish having seen the swing making lower highs and lower lows on the daily chart. Presently, the pair is consolidating around the zone. 

The bearish momentum can lead to a close below the 2017 lows if the fundamentals continue to strengthen the US currency against other majors. A peace deal between the Russian and Ukraine authorities can also bring in a reversal move from the support level which can be of a big relief to the European market as well

Conclusion and Weekly Price Objectives

As the CPI data will be released, the online brokers and investors are concerned about the next move of the market as the EURUSD pair enters a zone it has left 5 years ago. At this moment the consolidation will continue until a strong fundamental change in the sentiment in the market. 

The Federal Reserve recently increased its interest hike by 50bp as part of its plan to control inflation as fast as possible. The European market will likely see some boost if the German CPI shows a better outcome than the projected figure and the euro will be strong.

Tagged with: EUR/USD