EUR/USD Monthly Forecast – April 2019

The EURUSD pair saw highly volatile price swings during the month of March and closed on a dovish note. The price action was dominated by headlines driven momentum rather than influence from macro data updates albeit both factors having a significant impact on price action. Proceedings of geopolitical events had a great impact on EURO similar to trend from the recent past. However, rather than one-sided influence compared to early 2019, the month of March saw conflicting headlines which hampered progress for the pair in either direction. Hopes for positive progress in Brexit helped EURO climb higher in the early half of the month. The pair started on dovish note for March owing to lack of directional bias for EURO and broad-based strength of US Dollar. This caused the pair to decline below 1.12 handle but the pair rebound sharply and scaled back hold over 1.13 handle on Brexit headlines.

EURO Danced To Tune Set By Brexit Updates

Headlines of proceedings of Brexit controlled price action of EURO for the majority of the month and is highly likely to continue dominating price action during the first half of April. Legally binding assurance from EU’s Juncker to work on an alternative for Irish Backstop agreement and UK lawmakers voting to avoid no-deal Brexit were the major factors that helped EURO on its recovery rally. However, news that China & U.S.A had postponed the meeting between Presidents of both nations for concluding trade deal between two parties from the end of March to early April took the wind out of Market bulls capping gains above 1.13 handle. A dovish US FOMC update which saw FOMC members hint at the possibility of rate cuts in the year ahead and no-plans for rate hikes during 2019 caused a sharp downward slide of US Greenback in the global market helping EURO recover positive momentum from early March and scale 1.14 handle. EU leaders summit which saw leaders agree to grant UK’s request for Brexit deadline extension albeit attaching conditions for the extension of time frame also helped EURO maintain positive price action.

However, the EURO started to decline as dovish influence started creeping into the market over bearish tone in ECB MPC update resulting in the pair declining below the mid-1.13 handle. Further, disappointing macro data lead to German government bond yields seeing a decline with spread difference between US & DE bonds moving in favor of USD pushing the pair below 1.13 handle. Comments from key figures of major central banks across the globe starting from the US, EU, Japan, and Australia on global economic slowdown influenced a wave of declining T.Yields across all major government bonds across the globe. This invoked fears of recession and fuelled concerns of economic slowdown towards the end of the month resulting in the pair heading towards 1.1200 handle. But the global bond market saw recovery action as the trading session came to close on Friday and concerns of recession eased in the market. This helped the pair close above 1.12 handle for March. While risk aversion has eased in major global markets, the path with least resistance for EURUSD moving forward is likely to the downside.

EURO Suffers On Both Fundamental & Technical Fronts

Brexit and Sino-U.S. trade talks will remain the main focus of investors in immediate and near future trading session as talks resume between U.S.A & China in Washington during the first week of April. Meanwhile, the UK has less than a month left to get things in order for no-deal exit scenario unless they participate in EU parliament elections as the EU leaders are not ready to grant a longer extension given the fact that PM May’s deal has also been rejected by UK lawmakers. The looming possibility of no-deal Brexit which increased with each passing day and lack of solid progress in Sino-U.S. trade talks aside from the usual headlines are likely to weigh on investor risk appetite in the month ahead. Further, expectations of disappointing macro data updates and dovish political climate in EU also limit the possibility for strong recovery price action while the rebound in U.S. T-Yields is likely to underpin USD bulls dragging the pair below 1.12 handle in near future. With headlines on geopolitical events and US Dollar’s strength controlling the price action the forecast from fundamental perspective points to continued downside price action. Even when looking from a technical perspective, the path with the least resistance is the downside. This is evident from the fact that the pair has already declined well below multiple layers of critical support levels that had capped sharp declines for the last six months giving USD bulls a strong control over price action and hold below mid 1.12 handle in immediate and near future trading sessions.

Please feel free to lelt us know what you think in the comments below.