EUR/USD Ready For Next Wave Higher? – EUR/USD Analysis & Prediction

Key Points

• EUR/USD has been stuck in a range for 18 months, so will there be a key breakout?
• There is a busy data week ahead as the market tension is set to be relieved. 
• The US Dollar looks increasingly vulnerable in the short term.
• Is EUR/USD ready for the next wave higher?

Market Overview

When you look at EUR/USD on the higher time frames, you can see why trend traders feel this has become a frustrating market to trade. The price has been in a 700-800 pip range for the last 18 months. However, plenty of opportunities are on offer if you enjoy trading ranges.

With the markets becoming increasingly volatile, as evidenced by the volatility index (VIX) trading as high as 38 last week, over the next few months, the extremes of this broad range could likely be tested or even broken. The likely scenario for this would be a significant economic slowdown in Europe or the US, which could cause a weakness in the respective currencies.

An Action Packed Data Week

After what can only be described as a tense pause last week, the markets could be full of life again this week as the data hits our screens again. There have been real concerns, borderline panic, about the chances of a US recession. The catalyst was a significantly weaker US Non-Farm Payrolls report. This has put serious pressure on the US Dollar.

Today, traders will receive the ” warm-up” event to inflation, the Producer Price Index (PPI). This will give us an idea of producer inflation, which is often a good gauge for consumer inflation as increased costs for businesses are usually passed on to the consumer. A figure below 0.2% month on month will likely cause another wave of dollar downside.

On Wednesday, all eyes will be on the Consumer Price Index (CPI) report. The forecast is for inflation to remain flat at 3%, but if inflation were to come in lower than that, the dollar would likely suffer. If inflation rises, stagflation concerns could flood the market and again pressure the dollar after an initial surge. Either way, the dollar feels vulnerable in the short term.

EUR/USD Ready For Next Wave Higher?

The price of EUR/USD currently trades at 1.09300 and has yet to make any meaningful move so far this week. However, this is just a pause after the 220 pip surge from US Non-Farm Payrolls Day, which should not be ignored.

If the US Dollar continues to be under pressure in the short term, the bulls will likely target the NFP high at 1.10000. This move could come after the market successfully grabs the sell-side liquidity (SSL) created from equal lows at 1.09091. A “successful liquidity grab” means the market creates a wick below the SSL ($) line and closes back inside the range. However, a stronger dollar will likely result in a closure below this area, and traders could target a deeper retracement.