EURUSD Weekly Forex Forecast – 17th to 21st Oct 2016

Technical Outlook: EURUSD saw a strong decline last week with prices failing to even test the 1.1200 resistance level, reversing just a few pips below the round number. The declines saw prices breaking down below 1.1100 and even testing 1.1000 psychological support. However, there is evidence that the downside is now limited as we notice a bullish divergence on the Stochastics. With the oscillator forming a higher low against the lower low in prices, we can expect a near term retracement back to 1.1140 level which could be challenged for resistance. Traders should also note that the dip to 1.1000 is more than halfway down from the larger head and shoulders pattern that was formed weeks ago. The downside target remains near 1.0900 level which could see a continuation if price fails to post the correction back to 1.1140.

Fundamental Outlook: This Thursday’s ECB meeting will be the main event risk for the EURUSD. Although no changes are expected from the ECB, Mario Draghi’s speech in the press conference will be closely watched. Currently, expectations are on the QE, more than interest rates with some expecting to hear about tapering while some expect to see the ECB continue to push out its QE purchases beyond March 2017. Ahead of the ECB meeting, Monday’s inflation figures will sent the tone for the euro heading into an important week.

EURUSD decided to take a dive towards late last week and it’s been quite a rapid drop. It sure looks like the end is near for the bears as the bulls look set to take control this week. But who knows, right? We will see if this bullish divergence kicks in this week. If not, we expect next week… there’s plenty of fear now for those in position. But when there’s plenty of fear, some how a bounce is near. Bullish for EURUSD this week… that’s our opinion.

EURUSD Weekly Forex Forecast – 17th to 21st Oct 2016 – BULLISH