EUR/USD forecast as the earnings season presses on

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his… read more.
on Oct 20, 2021
  • The EUR/USD has been in a strong rally as the earnings season continues.
  • Companies like Netflix, Philip Morris, and Goldman Sachs released strong results.
  • The pair could rise by another 1% to 1.1750.

The EUR/USD price rose for the six straight days as investors focused on the relatively solid corporate earnings and the latest Eurozone inflation data. The pair rose to a high of 1.1670, which was about 1% above the lowest level this month.

Earnings season continues

The US dollar has retreated as investors reflected on the relatively strong quarterly results from the United States. On Tuesday, Netflix, the giant streaming company, announced solid results as demand for its services rose. The company added 4.4 million members in the third quarter while its revenue and profitability was higher than expected.

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Last week, big Wall Street banks like Morgan Stanley, JP Morgan, and Citigroup also announced strong results. The icing on the cake was Goldman Sachs, which recorded record earnings as its investment banking revenues rose. This week, companies that announced strong results are Verizon, Bank of New York Mellon, and Philip Morris.

The EUR/USD also rose after the relatively solid inflation numbers from the European Union. Data by Eurostat showed that consumer prices rose modestly in September. Precisely, the headline CPI rose from 3.0% in August to 3.4% in September. Core CPI, which excludes the volatile food and energy prices, rose from 1.6% to 1.9%.

Sadly, these inflationary pressures will continue for a while. Besides, the cost of everything seems to be going up as the supply chain disruptions have continued. Also, the price of crude oil has rocketed to the highest level in seven years while natural gas has risen to a record high.

Therefore, analysts believe that the European Central Bank (ECB) and the Federal Reserve will start tightening earlier than expected. The Fed is expected to start tapering asset purchases this year. The EUR/USD will next react to the latest Pgiladelphia Fed manufacturing index and initial jobless claims,

EUR/USD forecast

EUR/USD

The two-hour chart shows that the EUR/USD formed a strong bottom at 1.1530 last week. Since then, the pair has been in a slow upward trend and is currently trading at 1.1645. The pair has managed to move above the key resistance level at 1.1640, which was the neckline of the double-bottom pattern.

It has also risen above the 25-period and 50-period moving averages. Therefore, the path of the least resistance for the pair is to the upside. The next key resistance level to watch is 1.1750, which is about 1% above the current price.

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