With the ECB (European Central Bank) Monetary Policy meeting on Thursday this week and the FOMC (Federal Open Market Committee) meeting on Wednesday 21st March. It is worth looking at the interest rate forecasts for the two currencies and what it could mean for the pair.


The ECB Monetary Policy meeting on Thursday this week is expected to produce another announcement that the interest rate will remain at 0.00%. The Euro’s strength is beginning to become a worry for the ECB. If the exchange rate continues to increase then export prices will become too expensive, which will inevitably result in result in a drop in income for Europe. The ECB is wary of this and should continue to keep interest rates at a standstill while the Euro is strong.

US Dollar

The Federal Reserve is expected to raise interest rates 3 times in the next year. The first hike is scheduled for 21st March. It is expected that the rate will be increased from 1.5% to 1.75%. The further rate rises are expected in Q4 of 2018 where it is forecasted to increase again to 2%. With the 3rd interest rate hike expected in early 2019 where it forecasted to increase to 3%.

Effect on Exchange Rate

With the ECB not planning on raising interest rates anytime soon, and the FED expected to raise rates over the next year. This points towards an obvious BEARISH movement for the EURUSD pair. There are however some very key things to note:

  • Europe is continuing to produce good figures elsewhere which is why the currency is so strong.
  • US Dollar is very weak even with the market very confident of interest rate hikes.
  • Days before Donald Trump was inaugurated, he said the US Dollar was too strong. Since then, the US Dollar index has lost 10% of its value. A weaker US Dollar helps US exports and improves foreign earnings of US companies. A weak currency can be very good for the economy.  But has it become too weak?

Chart Analysis

EURUSD Daily Chart

The pair has recently reached a 3 year high at 1.2500 and was rejected from this area. On a monthly chart, it has recently been rejected by the long-term downward trend line. Both of these rejections provide a strong indication of a trend reversal. The green bars on the above chart are our main targets throughout the year should our prediction of a trend reversal be correct.

Target Areas:

  • 1.2100 to 1.2000
  • 1.1700 to 1.1600
  • 1.1300 to 1.1200
  • 1.0900 to 1.0800




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