EUR/USD, Oil Forecast: Two Trades to Watch

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Fiona Cincotta
By :  ,  Senior Market Analyst

EUR/USD rises after 9 weeks of losses, its longest losing streak since inception

  • EUR fell despite ECB hiking rates for a 10th straight meeting
  • Fed rate decision is due later this week
  • EUR/USD needs to take out 1.0630 to extend the bearish trend

EUR/USD is starting the week on a positive note amid a slight pullback in the US dollar from its six-month high and as investors look ahead to the German Bundesbank monthly report.

The EUR/USD fell for a ninth straight week last week despite the ECB hiking interest rates for a tenth straight meeting to a record 4%. However, the market is increasingly convinced that this could be the last interest rate hike from the ECB.

Still, ECB president Christine Lagarde affirmed on Friday that policymakers were not considering the possibility of rate cuts and instead, the central bank's intention was to keep interest rates elevated for an extended period if necessary.

ECB officials Panetta and Guindos will speak later today and steer expectations surrounding monetary policy's direction.

Meanwhile, last week, the USD rose to a six-month high versus its major peers, gaining ground for a ninth straight week after US inflation was stronger than expected, lifting the likelihood that the Federal Reserve could raise interest rates again before the end of the year. That said, the Fed is not likely to hike at this week's meeting. Instead, the market will watch the FOMC’s projections for clues over future rate hikes.

Michigan confidence data on Friday revealed that consumer sentiment was little changed in September, but expectations for the economy and inflation did improve. Inflation expectations for one year ahead fell by 0.4% to 3.1%, the lowest since March 2001.

EUR/USD forecast – technical analysis

EUR/USD trades below a falling trendline; it found support at 1.0630 last week, which is the level sellers will need to break down to extend the bearish trend. The RSI supports further downside.

A move below 1.0630 opens the door to 1.0525, the March low.

 Bullish recovery would need to see a rise above 1.0770, last week’s high, with a rise above here exposing the 200 sma and falling trendline resistance of 1.0825.

eur/usd forecast chart

Oil rises towards $93 a barrel

  • Oil extends gains after three straight weekly rises
  • Supply concerns continue to lift the price
  • Oil trades deeply in over-bought territory

Oil prices are rising on Monday, adding to gains from the previous weeks, as WTI traded around 15% since the start of the month.

The price is buoyed by expectations of a widening supply deficit in the coming quarters as Saudi Arabia and Russia will extend oil production cuts to the end of the year and amid optimism surrounding the demand outlook in China the world’s largest oil importer.

In addition to China's stimulus which saw the PBoC cut the reserve ratio to support the economy last week, recent from China was also better than expected. Stronger retail sales and industrial output figures boosted hopes that the economy is turning a corner. Meanwhile, OPEC+ and the IEA see China demand remaining strong over the coming quarters.

Traders will watch central bank decisions this week, including the Federal Reserve and key economic data from China. Any sense that the Fed could be close to ending the rate hiking cycle could be considered a positive for oil prices.

Today, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, will speak at the World Petroleum Congress. Comments on the kingdom’s crude oil policies will be watched closely, as the kingdom appears to be pushing oil to $100 a barrel.

Oil forecasts – technical analysis

Oil is extending gains, trading above a steep rising trendline. The price remains in overbought territory, where it has been for most of September, so buyers should be cautious as a pullback or some consolidation could be on the cards.

Buyers could be looking for a rise towards resistance at 93.20, the November high.

Meanwhile, support can be seen at 86.35, last week’s low, ahead of 84.60, the August high.




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