EUR/USD Monthly Forecast – April 2017

Unlike some of the other currency pair, the EURUSD pair had a good first half of the month in March but then tapered off towards the end of the month which promises that the month of April is likely to be quite tricky on where on the pair is likely to end up. The first half of the month saw the pair move towards the 1.09 mark which was the highest that it has been since the beginning of the year and this move up promised a lot for the bulls as it opened up the possibility that the pair would continue to move higher towards the 1.10 mark and further beyond.

EURUSD Likely to Stay Within Range

This happened despite the fact that the Fed has chosen to hike the rates in the US during March but the accompanying statement was what disappointed the dollar bulls. They had expected the statement to provide a roadmap or some kind of a guideline on when the next rate hikes would be. But the Fed chose to adopt the middle path as usual and said that the further hikes would be dependent on the incoming data. This was not hawkish enough for the market and they chose to show their disappointment by some wholesale selling of the dollar across the board.

This helped the EURUSD pair to climb off from the lows of its range around 1.05 and push through 1.06 and then on to 1.07 as well. Normally, over the past few months, the moves in this pair had been guided purely by the strength and weakness of the dollar. But what was different in March was the fact that euro also decided to join the party. We had Draghi saying that the ECB was very happy with the way the eurozone economy was shaping up and the inflation and other economic parameters were well within expectations.

The market sought to interpret this as signal that the ECB might begin to think of reducing its participation in the markets in the near future and began buying the euro. This was enough for the bulls to push the pair through 1.08. This region had seen some strong selling in the past but after a brief blip, the pair pushed through 1.08 and kicked on further towards 1.09 and threatened to have further gains. But towards the end of the month, reality sunk in as the dollar began to gain in strength.

We also had reports saying that the markets had chosen to over interpret the messages from the ECB which had no intention to leave the markets till the end of the year. A combination of these factors pushed the pair back through 1.08 and once that happened, the selling picked up pace and the pair sunk through 1.07 and ended the month below that figure.

Technically, a close look at the weekly charts would show the amount of buying and support that can be seen in the 1.05 region in the EURUSD pair. The pair had repeatedly tried to break through this region and everytime that it had tried to do so, it has been met with some strong buying which has helped the pair to bounce and we expect the same to continue in the coming month of April as well. We expect the extended range between 1.05 and 1.09 to continue to hold the volatility in the pair and this is something that will make the ECB comfortable as well.

These levels have been well defined in the charts as well and with no specific push from any direction, we expect these levels to hold the prices for the coming month. The first week of April might show a bit of a correction of the fall that was seen in the last week of March but we do see a visit back to the range low at 1.05 during the course of the month and this region should hold for now. Also, we do not expect the Fed to change much of their language when they release their minutes for the month of April and so we could expect the strength of the dollar to be generally tapered down in the coming month which should help the EURUSD pair to remain decently bid during the course of the month.

The range specified above should also keep the ECB and the Fed quite happy with where things are and ultimately, that is what is more important. Important battles lie ahead with Trump and his team continuing with some major policy changes and with Germany and France preparing for elections later in the year but for now, the EURUSD pair should be happy with the space that it is in now.