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The Euro To Dollar Exchange Rate Slips Towards 2016 Lows As USD Retains Bullish Stance
The EUR to USD exchange rate could end 2016 relatively near the year’s worst levels unless it manages to recover on Thursday or Friday.
Despite a lack of influential US data on Wednesday, the ‘Greenback’ was able to push EUR/USD down by around half a cent on Wednesday afternoon.
Expectations for the US economy to be stimulated in 2017 alongside regular rate hikes from the Federal Reserve have left the US Dollar’s underlying movement bullish and could lead to EUR/USD hitting new lows throughout 2017.
Worries regarding the outlook of the Italian banking sector mounted once again to put the Euro US Dollar exchange rate on a fresh downtrend.
Concerns over Monte dei Paschi continued to weigh on the Euro (EUR) this week, with the European Central Bank (ECB) prompting jitters by signalling that the lender was more lacking in liquidity than previously thought.
With the bank now needing 8.8 billion Euros of recapitalisation rather than 5 billion the appeal of the single currency diminished, fuelling concerns over the outlook of the Italian banking sector.
As the latest US consumer confidence index showed an unexpected surge in optimism the Euro US Dollar (EUR USD) exchange rate slumped sharply, with the move exacerbated by the week’s more limited trading volumes.
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Yesterday, the EURUSD initially fell with a wide range but found enough buying pressure to trim some of its losses and closed in the middle of the daily range, however the currency pair closed below the previous day low, which suggests bearish momentum.
The currency pair closed shy below the 10-day moving average that should act as a dynamic resistance and continues to trade below the 50 and the 200-day moving averages that should act as dynamic resistances.
The key levels to watch are: a Fibonacci extension at 1.0666 (resistance), a daily resistance at 1.0622, the 10-day moving average at 1.0433 (resistance), a daily resistance at 1.0462 and the new multi-year low at 1.0352(support).
The freshly released US macro data dragged the US dollar slightly down. The EUR/USD pair moved higher to reach 1.0493, but couldn’t surpass the key level at 1.0500. As long as the pair is staying below this level, bears dominate the trend.
The euro rose by 0.9% against the dollar to 1.0510, retreating from a 13-year low of 1.0352 last week.
Yesterday, the EURUSD rose with a narrow range and closed near the high of the day, in addition the currency pair managed to close above the previous day high, which suggests a strong bullish momentum.
The currency pair closed back above the 10-day moving average that should act as a dynamic support and continues to trade below the 50 and the 200-day moving averages that should act as dynamic resistances.
The key levels to watch are: a Fibonacci extension at 1.0666 (resistance), a daily resistance at 1.0622, the 10-day moving average at 1.0437 (support), a daily support at 1.0462 and the new multi-year low at 1.0352(support).
EUR/USD surprised with a surge to 1.0653 this morning. The last trading day seems to be quite voaltile and interesting. Currently market price is 1.0545. If the pair succeed to close above 1.0560, next bulls target is seen at 1.0660.
2017 EUR/USD Annual Forecast
EURUSD had a strange sort of an year in 2016 as the Euro as such did not have much of a volatility but all the attention and the volatility was more to do with the US dollar than the Euro. The only major event of the year for the Euro came towards the end as the ECB announced a continuation of its QE program which was expected to come to an end by March 2017. The ECB announced in December that it would continue the program till atleast the end of 2017 and would continue to be in the markets till 2018. This was a disappointment to the Euro bulls who had been expecting a tapering of the program in due course of time.
The pair did manage to reach a high of 1.16 for a brief period in May but from that time, it has been a slide all year long except for a brief period just after the election of Trump as the President of the USA, when the markets were expecting a victory for Hillary. The pair jumped to 1.12 following the news but was pushed back following some serious dollar strength and this was followed in December by the Fed decision to hike rates and guidance for further rates hikes in 2017. This crashed the pair and it broke through some strong supports between the 1.0500 and 1.0600 and looks set to suffer against the onslaught from the US dollar.
From a fundamental perspective, it looks like a difficult period for the EURUSD pair in the year 2017 as the pair now trades at the lowest ranges since 2002. There is nothing to prevent it from falling down to parity and in fact, this is what most banks and funds expect it to do. With the ECB bent on continuing its QE program and with Draghi not even hinting about any concern over the rate of the Euro, there is little fundamental support for the euro. On the other hand, the Fed has been hawkish of late and they can afford to be so as all the latest round of data from the US over the past few months have been pointing to a strengthening economy. With rates hikes being determined by the data, the dollar is in a very good position as the Fed is likely to raise interest rates atleast twice in 2017 and probably even three times if the data supports such a move. The Fed is in a very comfortable place and with Trump indicating that he would like to increase spending, the Fed would like to align with his campaign goals and encourage the same as well. The yields in the US also continue to move higher and this will only attract more and more investments into the US and the dollar which will only help to further strengthe
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