EUR/USD forecast for the week of July 31

The EUR/USD pair initially fell during the week, but found enough support near the 1.16 level to turn around and rally. We reached above the 1.1750 level, and it now looks as if the pair will continue to climb over the longer term. Pullbacks should be buying, but we are overbought to say the least. I think that pullbacks will be necessary, as we have more than enough over exuberance to dictate that a pullback could be rather tough. The 1.15 level below should be massively supportive, and as long as we can stay above there, I remain bullish. The market has gone up in a straight line, and this always concerns me, so I think it’s only a matter of time before the sellers come back in, or at the very least, profit-taking happens. Do not let that dissuade you though, unless of course we break down below the 1.15 level.

EUR/USD Weekly Forecast July 31-August 4

Trading in EUR/USD was volatile in the past week but the pair closed near highs and posted a third consecutive week of gains, once again making a notable technical break.

The Federal Reserve held its monetary policy meeting in the past week and the statement released on Wednesday had only minor changes to inflation rhetoric and a slightly more optimistic reference to the labor markets. The Fed signaled that balance sheet normalization will start ‘soon’ which was expected as Fed Chair Yellen said something similar at her testimony to Congress.

The lack of a hawkish element to the meeting minutes triggered a continuation of the bullish trend in EUR/USD, driving the pair above the 2015 high of 1.1714. The rally was met with sellers at a horizontal level that is respected on a monthly chart at 1.1767. While the pair sold off sharply on Thursday after testing the 1.1767 resistance, it recovered on Friday to close the week near the level. The weekly close marks the highest since the second week of January 2015.

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July Eurozone Inflation Unchanged At 1.3%, Core Rate Edges Higher

The July Eurozone flash inflation reading was unchanged from the previous month at 1.3% and was also in line with consensus forecasts. The headline figure of 1.3% compared with a rate of 0.2% in June 2016.

The underlying inflation rate increased to 1.2% from 1.1% from June. This rate was above expectations of a 1.1% rate for the month and underlying inflation also increased from 0.9% last year with a gradual move higher over the past few months.

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