EURUSD Tests Major Resistance at 1.1776, But Rabobank Eyes Lower
The EURUSD has reacted favourably to the greenback’s decline over the last week, gaining almost 1%. However, one bank predicts 1.1600 lies ahead. We are unlikely to see much action from the Dollar ahead of tomorrow’s virtual Jackson Hole meeting of central bankers. As a result, the EURUSD pair should trade broadly sideways. However, that has not been the recent case.
Last week the Euro was trading at its weakest level against the dollar in 2021. Although, since the dip to 1.1664, it has been one-way traffic higher. As a result, this morning, EURUSD was testing trend line resistance. However, the trading pair has retreated slightly and is currently doing business at 1.1760. But Rabobank is bucking the trend and today announced their 6-month price target of 1.1600, citing a safe-haven bid for the dollar in the wake of the delta variant. And that may be the case, but tomorrow’s statement from Fed Chair Jerome Powell could ignite the Euro to an upside breakout.
The recent poor economic data from the US has lessened the odds of an aggressive reduction in bond purchases. And despite the consensus that Powell will provide a timeline for tapering, he may also choose to sit tight. And in that event, the Dollar may succumb to selling pressure, forcing the EURUSD out of its descending wedge pattern.
Euro Price Forecast
Since May, the EURUSD price has been trending lower, forming a narrowing wedge pattern. The top end of the formation is seen at 1.1776, just above today’s 1.1774 high. This is a significant level of resistance, which, if breached, should lead to systematic buying. In this event, an extension to 1.1900 looks possible.
However, a hawkish statement tomorrow could lead to a test of the bottom end of the formation at 1.1640. This would represent a new low for 2021 and within a whisker of the November 2020 bottom of 1.1603.
Whilst it’s unclear what to expect from Jackson Hole, it’s safe to assume we could see some volatility tomorrow.
EURUSD Price chart (Daily)
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