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EUR/USD Monthly Forecast – April 2018

By:
Colin First
Updated: Apr 1, 2018, 17:13 UTC

The pair spent one more month in a period of ranging and consolidation

EUR/USD Monthly Forecast – April 2018

The EURUSD pair completed one more month of ranging and consolidation in March though there were a lot more fundamental developments during the course of the completed month than what we saw in the month of February. But considering the fact that the month of March has passed off peacefully without much of volatility, we can safely conclude that the ranging is intact and we could probably see a breakout sooner than later.

EURUSD in Range

There were a bunch of events that were supposed to have rocked the markets but the traders would be surprised to note that the pair continues to trade within the 250 pip range that it has been doing over the last few weeks now. The month of March was when the Fed hiked the rates for the first time this year. This was generally well expected and also priced into the markets as a whole and that is probably why the impact on the markets was minimal. The market is also pricing in a couple of more rate hikes during the rest of the year but ideally, the market would wish that there were 3 more rate hikes for the rest of the year.

EURUSD Weekly
EURUSD Weekly

Also, it was the first rate related press conference that was addressed by the new Fed Chief Powell and he also gave in to the fact that the incoming data from the US continues to be strong in general and this should encourage the Fed to make more rate hikes but he stopped short of laying down any specific timelines for the same. Also, the month of March was also the month when there were a lot of geopolitical tensions across the world due to the action of the US government to impose a large amount of tariffs on the import of goods from China.

This was not something that was anticipated well before hand and it came as a large surprise to the markets, along with the threat that there would be more such tariffs. The Chinese also retaliated, though to a lesser extent, and this gave rise to a lot of risk and uncertainty in the markets due to the fear that this would lead to a global trade war. Thankfully, there has not been much of a follow up in the direction and this has helped to hold up the dollar. Amidst all the developments that we have described above, it is indeed a surprise that the EURUSD pair stayed relatively calm in its wider range between the 1.22 and the 1.2450 regions over this period and this is likely to continue for now.

A Lean Month Likely Ahead

There is not much by way of fundamental events or news or data to look forward to, in the coming month of April. Apart from the usual set of employment and other data from the US and other countries, we do not have much on the calendar. But we also have to note that the risks surrounding the geopolitical issues continues to haunt the markets and remain just beneath the surface. This would mean that this could arise at any point of time over the short and medium term and the traders need to be wary of this.

Also, the pressure is on the incoming data from the US with a large part of the market expecting it to continue the trend of being strong over the coming months. This is important for the market to continue to believe that there would be atleast 2 more rate hikes for the rest of the year and possibly three as well. Of course, slight slip up in the data for a month or two should not change the outlook in any manner but at the same time, it is important that the slip in the data, if any, should be within limits. This is what the market would be looking forward to. Also, the fact that the ranging has been continuing for quite some time would mean that a breakout, if and when it happens, is going to be a large one.

About the Author

Colin specializes in developing trading strategies and analyze financial instruments both technically and fundamentally. Colin holds a Bachelor of Engineering From Milwaukee University.

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