Weekly Forecast

EUR/USD (1.4427) – Weekly Forecast
Weekly forecast levels: 1.4190/1.4580
Trend for the week – Downward/Neutral
Market Focus: The main news is the high US inflation that would not allow to the Fed to make new interest rates cut. The key news in the coming week are the reports for the US Housing Starts and Building Permits that probably will send new bad signals for the US housing sector. GDP-Final is the other key economic event in the coming week.
Weekly Strategy: The high US inflation cut the Fed expectations for new interest rates cut in January 2008. This report together with the long-time expected correction of the dollar start on Friday with high dollar recovery. During the coming week the forecast is that the dollar will try to continue with the gains from the recent week especially from Friday. The dollar has the power to recovery to levels of 1.42xx against the euro in the coming week. The news that will send negative signals for the dollar is the expecting housing reports for the world biggest economy.

Euro/dollar held below the 20-day moving average and hit a 1 ½-month low on Friday. It probably is on the verge of starting a significant downtrend but the confirmation would come only from a close below 1.4250,. In addition, there is a head-and-shoulders formation targeting 1.4085.

Immediate support is at 1.4354. A break below this Fibonacci retracement level would suggest a test of 1.4290. Below 1.4250, euro/dollar has good support at 1.4165.

Initial resistance is seen at 1.4525. Above 1.4635, strong resistance is seen at 1.4750.