EURUSD Forecast And Technical Analysis Nov 22nd
Asian markets and US futures are on the rise, as US tax reform is expected to take effect from now on. The MSCI Asia-Pacific stock index sees pricing above the 2007 top. We see that the dollar lost strength due to the decline in US 10-year-bond yields and the volatility in the yield curve (10-2 year bond interest differential). But next year, the US economy, which is growing above its potential may create favourable conditions for three or more interest rate hikes and help keep the dollar valuation process going.
Speaking at New York University yesterday, FED Chairman Yellen stated that it is dangerous to enter into a rapid increase in interest rates because she has not seen a recovery in the prospective inflation expectations in the US yesterday. Fed members’ medium-long term Fed rate of interest is estimated at 2.75%, while current Fed benchmark interest rate is between 1% and 1.25%. The member forecasts to be renewed by the Fed decision on December 13th indicate that the Fed could raise three interest rates in 2018.
There are lots of bearish and bullish themes for both currencies.
On the Euro side;
ECB may delay the start of tapering until middle of next year on low inflation expectations
While much of Germany’s industry is competitive at stronger euro levels, the cost structure of other economies is not as favourable
In Italy, each of the four main parties opposing the Democratic Party subscribes to the introduction of a parallel currency to rival the Euro
The market will be more sensitive to a cut in the inflation forecast than an increase in the growth forecast
French, Italian and Spanish benchmark yields have declined
Macron’s standing in France is lower than Trump’s in the US
Europe still has not found a consistent way to clean its dirty financial laundry
So it will be much better to trade with technicals: