Fundamental Forecast for EUR/USD: Neutral
- The Euro[1] continued its streak of weakness, losing ground to five of the other seven major currencies as the calendar turned from October to November.
- There are no ‘high’ rated German or Eurozone data releases in the coming week, meaning the only potential domestic catalyst in the days ahead is progress around Italy’s budget (more attention will be paid to the US midterm elections[2] and Brexit).
- The IG Client Sentiment Index[3]has quickly flipped to bearish as retail traders buy the Euro dip.
See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides[4].
The Euro was the third-worst performing major currency for the second week in a row, losing ground against all but for the Swiss Franc[5] (EUR/CHF +0.52%) and Japanese Yen[6] (EUR/JPY +1.01%). This was to no fault of the Euro; rather, buoyed risk appetite lifted higher yielding currencies, and progress on the Brexit front sparked a British Pound[7] reversal (EUR/GBP -1.24%).
To this end, as the world’s reserve currency, the US Dollar proved weak relative to the Australian and New Zealand Dollars too. EUR/USD[8] only dropped by -0.33% last week, but three of the four best performing EUR-crosses were safe havens (EUR/CHF, EUR/JPY[9], and EUR/USD).
Unfortunately for traders, there may not be much to extrapolate from the price action seen last week. The movements seen in higher yielding and risk-correlated assets appears to be tied to portfolio rebalancing effects after a volatile October.
