EUR/USD forecast: euro near $1.10 as dollar hits 19-month high, yen tests 160
The euro ended Friday near $1.10 after a run of daily declines, as the US dollar index climbed to a 19-month high on bets of a December Federal Reserve rate hike. The pound held near $1.32 after UK growth of 0.7% in the third quarter, and the yen briefly weakened past 160 per dollar.
Trading Economics data shows EUR/USD closing around 1.1017 on 13 November, down 0.28% on the day and about 1.2% lower over the month. GBP/USD finished near 1.3203, close to its lowest level since mid-October.
Why is the dollar so strong this week?
US inflation is running hot again. October consumer prices rose 0.4% on the month, above forecasts, and core prices rose 0.3%, both beating expectations. Fed Governor Christopher Waller said a half-point increase should be considered in December if core inflation ran at 0.3% or more, and markets now fully price a December hike.
Friday’s producer price data was a little softer than feared: October PPI rose 0.3% on the month against a 0.4% forecast, according to FXEmpire. But annual producer inflation was still the highest in four years, which kept the dollar bid. Higher expected US rates make dollar assets more attractive, which pulls money away from the euro, pound and emerging market currencies such as the rand.
What is the EUR/USD forecast for next week?
Analysts lean cautious on the euro. RoboForex said on Friday that its outlook for 16 to 20 November “has shifted to an entirely bearish scenario”, with a confirmed break below 1.1044 opening a move towards 1.1000 and then 1.0950. It said a sustained move above 1.1272 would cancel that view. FXEmpire’s Vladimir Zernov flagged support at 1.1015 to 1.1030, then 1.0935 to 1.0950.
There are also reasons the euro could steady. RoboForex noted that weak US retail sales or softer-sounding Fed minutes could trim rate-hike bets, and stronger expectations of a European Central Bank hike in December could support the euro. Trading Economics reports that analysts expect one final ECB hike next month, while political and fiscal uncertainty in France weighs on sentiment.
Why did the pound hold up after UK GDP?
The UK economy grew 0.7% in July to September and 1.9% on a year earlier, the Office for National Statistics said on Thursday. Services grew 0.9%, production 0.1%, and construction fell 0.7%. September alone grew 0.2%, stronger than expected, and markets now price more than an 80% chance of a Bank of England hike in December, according to LSEG data cited by Trading Economics.
That growth helped sterling limit its losses against a strong dollar, but did not reverse them. GBP/USD support sits at 1.3185 to 1.3200, per FXEmpire, with the next zone at 1.3125 to 1.3140.
Will Japan step in to support the yen at 160?
The yen weakened to 160.19 per dollar in Tokyo on Friday 13 November, its weakest in about two and a half months, before easing back below 160. Japan has already spent a record 27.1 trillion yen defending its currency this year, including the first joint US-Japan intervention in 28 years in July. Finance Minister Satsuki Katayama warned of “one-sided and sharp moves” and said Japan would respond appropriately with the US Treasury.
Analysts cited by Seoul Economic Daily put the likely intervention trigger near 163. Many also expect the Bank of Japan to raise rates from 1.25% to 1.5% at its 17 to 18 December meeting, which would match a quarter-point Fed hike and leave the rate gap unchanged.
How did traders on WiseProp Trader position in forex?
Trades placed on WiseProp Trader on Friday split sharply by currency. EUR/USD was the busiest forex pair, with 85 trades from 14 traders, and 59% of them were buys, a bet on the euro bouncing from its lows. Sterling was the opposite: 22 of the 24 GBP/USD trades were sells. On USD/JPY, 61% of 28 trades were buys, siding with the dollar against the yen. Across all markets, 34 traders placed 300 trades on the day.
What should traders watch next?
- Tuesday 17 November: US retail sales for October.
- Wednesday 18 November: final eurozone October inflation (the preliminary reading was 4.0%) and the Fed’s October minutes, per RoboForex’s calendar.
- Thursday 19 November: the South African Reserve Bank decision, a test for the rand, which slid to a seven-month low near R17 on Friday.
- Japanese officials: any sharper warnings if USD/JPY pushes above 160 again.
The strong dollar also hit crypto this week; see how bitcoin slipped below $69,000. More currency coverage is in our forex hub.
Trade the markets you read about. Open a free WiseProp Trader account, with no deposit.
This article is for education and information only and is not financial advice. Figures are as reported by the sources linked above.
