EUR/USD the price is reaching key level, will the bears manage to overcome

FX forecast / EUR/USD / Our expectations

On a monthly chart, we can see that the price is making lower tops and deeper bottoms. A medium-term upward trend leads us to the main diagonal and horizontal resistance of the downward channel. At this level is also strengthen by Fibo 38.2 and SMA 200, which makes it even more significant. Several attempts of the bulls to overcome the level expressed in false breakthroughs, after which the price returns again under the resistance.

Fundamental analysis in the long run is positive for the dollar. What the FED is currently doing (monetary policy tightening and interest rate hike), the ECB only talks about it. Although the European Central Bank will most likely start to raise the interest rate, we still do not know when this will begin. On the other hand, the FED has already raised its rate once this year, and we are expecting 3 more increases by the end of 2018. Assuming that the hikes are always by 25 basis points, that means that by the end of 2018, the interest rate in the EU will remain 0%, while in the US it will be 2.5%. This big difference is very likely to affect the pair in the negative direction. Negative for EUR and strengthening the USD.

SL: 1.2650

Alternative scenario: If the price breaks below the zone of support and make higher top, the negative scenario will be dismissed and we may see a change in investors mind toward USD.

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