EURUSD Weekly Forex Forecast – 22nd to 26th May 2017

Technical Outlook: EURUSD broke past the 1.0950 resistance level and extended one of the strongest weekly gains. By Friday’s closed, EURUSD breached 1.1200 level. However, the gains are unlikely to be supported at this level considering that most of the gains came on account of investor sentiment to the U.S. administrative policies than economic data.

We expect to see EURUSD post a correction back to 1.0950 which is the obvious downside target in price. Watch for 1.1100 which is the most immediate support level that can be tested. Note the bearish divergence on the 4-hour chart and the hidden bearish divergence on the weekly chart, which point to a near term dip in EURUSD. Therefore, it is best not to buy the currency pair at the current levels but to wait for price to decline to 1.0950.

Fundamental Outlook: The euro turned bullish last week breaching the $1.110 handle. The reversal came amid a bout of strong economic data from the eurozone including the GDP which was confirmed at 0.5% on the quarter. Inflation data also confirmed that core CPI rose 1.2% in April.

The U.S. dollar’s weakness partly contributed to the strong gains in the EURUSD. The week ahead is relatively quiet with the German Ifo business climate expected to rise once again. The index is already at a 6-year high. The German GDP figures are also up for revision but no changes are expected. Flash manufacturing and services PMI are due later in the week.

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