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Euro (EUR/USD) Forecast – All Eyes on the Fed and ECB Next Week

Euro (EUR/USD) Forecast – All Eyes on the Fed and ECB Next Week

Nick Cawley, Senior Strategist

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EUR/USD Forecast - Prices, Charts, and Analysis

  • EUR/USD slides back towards 1.1100.
  • Fed blackout period ahead of next week’s FOMC meeting.
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The US dollar has perked up this week and currently trades around 150 pips higher than this week’s 99.50 low print. Recent US economic data has been marginally better than expected, while the US dollar index has been boosted by a bout of weakness in a range of basket currencies. With no Federal Reserve speakers scheduled until after next Wednesday’s FOMC policy decision, the US dollar may consolidate this week’s gains ahead of the Fed’s decision.

For all market-moving events and economic data releases, see the real-time DailyFX Calendar

US Dollar Index Daily Chart – July 21, 2023

image1.png

Central Bank Policy Meeting Dates Calendar

Ahead next week are two central bank policy meetings that will direct EUR/USD in the coming weeks. The Federal Reserve is expected to announce a 25 basis point rate hike on Wednesday, July 26 at 19:00 UK time, while the European Central Bank is also expected to lift rates by a quarter of a point the next day at 13:15 UK. Both central banks will have press conferences 30 minutes after their decisions are announced and these will be key for any clues to future action by both the FED and the ECB. It will be a volatile time for EUR/USD traders.

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EUR/USD is now fading towards a prior level of resistance turned support at 1.10956 with horizontal support below at 1.10758 guarding the February swing high at 1.10328. This last level should hold if tested ahead of the two central bank meetings.

EUR/USD Daily Price Chart – July 21, 2023

image2.png

Chart via TradingView

EUR/USD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 13% -18% 3%
Weekly -3% -14% -6%
What does it mean for price action?
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Retail Traders Remain Short but Are Net-Buyers of EUR/USD

Retail trader data shows 33.36% of traders are net-long with the ratio of traders short to long at 2.00 to 1.The number of traders net-long is 24.45% higher than yesterday and 32.35% higher than last week, while the number of traders net-short is 18.43% lower than yesterday and 10.29% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net short.

What is your view on the EURO – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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