Things have not grown calmer in the broad Forex market. The EUR/USD saw its low for the week on Thursday around the 1.15860 ratio and then produced a high near 1.16860 on Friday.
Forex including the EUR/USD have seen fast dynamic reversals in the past three months. The Iranian situation is certainly the chief instigator of price action. The higher energy values have sparked concerns about inflation and the U.S Fed is starting to be spoken about in terms of possibly having to change its outward stance regarding interest rates. However, the Fed’s next FOMC decision is not until the 17th of June and a lot can happen between then and now.
Trump Rhetoric and War Dynamics
When the EUR/USD starts to trade tomorrow not only will the Iranian situation be a thorn in the side of financial institutions. The European political climate is growing uneasy regarding recent fighting between Russia and the Ukraine. An incident on Friday in which a Russian missile supposedly meant for the Ukraine and instead landed in Romania will not calm matters. However, financial institutions going into the weekend did show an ability to maintain a higher EUR/USD, so day traders should not overreact.
Risk appetite in the broad equity markets, largely from the U.S, are noteworthy, but this may also cause other global indices to continue seeing buying action. USD centric weakness was seen late last week as sentiment continued to shift abruptly. The sharp turns in the EUR/USD correlated to other major currency pairs. Yet, the results of the EUR/USD and its current values remain via a three and six month perspective as a bit lower comparatively for the currency pair. If folks are more optimistic globally this would help the EUR/USD be bought near-term.
Intriguing Thoughts of Still Being Oversold
Some day traders and large players in the EUR/USD likely still have the notion that values remain oversold. However, looking for upside in the EUR/USD and a push towards the 1.17000 realm may need some more positive impetus to develop which has not effectively been seen in Forex.
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Talk of a potential U.S and Iran deal are certainly generating positive sentiment, but it might prove unwise in the near-term to bet wildly on the EUR/USD moving ambitiously upwards until the U.S White House says a deal is done.
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In the meantime the price of WTI Crude Oil remain elevated and cautious too.
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If the price of energy continues to trickle downwards, then bets on the EUR/USD incrementally climbing may be appropriate by speculators, but a large amount of risk management will be needed.
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The quick reversals seen last week in the EUR/USD may still dominate conditions in the coming days until clarity reigns.
EUR/USD Weekly Outlook:
Speculative price range for EUR/USD is 1.15850 to 1.17200
The EUR/USD like the broad Forex market has not been a friendly speculative playground for the unprepared the past three months. Sentiment remains the chief driver of short and near-term values. The notion that the U.S Fed could become hawkish is going to create a layer of resistance on the EUR/USD until WTI Crude Oil prices come down even more.
The EUR/USD might look like an intriguing bet for upside price action, but timeframes depending on the size and capability of a speculators’ account will force risk management decisions that might not be able to include holding the currency pair overnight. The chance of President Trump creating a wave of price action via a simple statement on social media also remains a danger. The past few months have seen a slew of price action early on the Monday openings in the EUR/USD, tomorrow’s movement will likely be just as dramatic. Day traders need to remain cautious and use solid risk taking tactics to make sure they are protected from possible storms to come.
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Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.
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