Forex forecast

EUR/USD Forecast: getting closer to 1.4000

06.05.2014 16:52:10

The EUR/USD broke higher, reaching 1.3930 on the back of better than expected Services PMI across Europe: only German one missed expectations, triggering a small pullback down to 1.3910, albeit price quickly bounced back, holding a few pips below mentioned daily high.

Having been stuck in range for over three weeks, the encouraging data helps diminishing chances of an ECB action as soon as this week. Still the risk of a surprise announcement is pretty high, which keeps investors in cautious mode: should not be a surprise if current breakout shows no follow through. 

Technically, the bullish dominant trend remains in place with current advance supporting a retest of the year high at 1.3966 for the upcoming sessions. The 4 hours chart shows price accelerating well above a bullish 20 SMA, while indicators turned north above their midlines, still too close to neutral readings. As long as above 1.3900 the upside is favored, with a break above 1.3930 daily high pointing for an extension up to 1.3966; a break above this last should see price approaching the critical 1.4000 figure before the end of the day.

Buyers should now surge on approaches to the 1.3880/1.3900 area, with a break below probably extending down to 1.3840/50 price zone.