The External Background Prevents the EUR/USD from Rising

The EUR/USD pair has a nervous and volatile week ahead of it. It has happened to the main currency pair quite often recently, but it seems that the biggest news is still ahead.

So, by the end of October the EUR/USD pair has fallen to the lows it reached on July 20th. The descending impulse started accelerating after the European Central Bank meeting and then it got even faster. In addition to that, the US GDP numbers over the third quarter provided more support to the “bears”. The first estimation of the US economy in the third quarter 2017 showed the expansion by 3.0% y/y. It is more than expected (+2.5% y/y), but less than the second quarter reading (+3.1% y/y). We should note that the readings will be revised several times, and usually, they are revised upwards. It means that the final numbers may be much better.

The statistics look even more impressive if we remember that there were several huge hurricanes in the USA in the third quarter. The PPI reports with real numbers haven’t been published yet, because companies and enterprises provide them with delay, mostly because of the above-mentioned hurricanes. Excluding this “hurricanes factor”, the GDP growth would have been higher by 0.5% on average. Anyway, the strong GDP reading is a good signal before the November meeting of the US Federal Reserve On Wednesday.

This week, there will be another catalyst to support the US Dollar and to put pressure of the Euro – the “Catalonian” driver. Earlier, the Spanish authorities dismissed the head of Catalonia, Carles Puigdemont, and right now his duties are officially performed by the Spanish Council of Ministers. This way of governing, Catalonia will continue until December 21st, when the region will have to elect its new parliament. However, “the thermostat doesn’t drop” – Puigdemont doesn’t agree to the dismissal. In addition to that, there were several protests featuring thousands of people, who were against Catalonia’s will to exit Spain and become an independent country.

First of all, let’s take a look at the H4 chart of the EUR/USD pair, where the price is moving to the downside quite steadily. If we consider the short-term scenario, we should expect a new correction to the upside to reach the retracement of 50.0% at 1.1704, which is inside the current resistance area. After finishing the correction, the pair may continue falling inside the downtrend and form a new descending impulse. The most probable target of the downtrend is 1.1510 located near the retracement of 38.2%.

EUR/USD 4H Chart
EUR/USD 4H Chart

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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.