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EUR/USD Forecast 11 Feb 21

Welcome back. As we approach the end of the week, it is time to get a pulse check on the current market.

EURUSD Daily Chart

Technical Analysis

In this EUR/USD daily chart, we see the currency pair break beyond the middle bollinger band. An attempt at 1.22 is possible as we continue to observe bullish pressure.

The middle bollingar band and 1.21 will function as immediate supports.

A point to note is that we saw some resistance in this region back in Nov / Dec 2020. This may still be at play.

Sentiment Analysis

Following the disappointing US NFP, we see the USA Core CPI perform worse than expected. It reported 0.0% instead of 0.2%. Consumer Price Index is important because the price of consumer goods is a significant component of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation. Speculations of a possible interest rate hike may generate demand for the currency. Therefore, this disappointing report will add to the negative sentiment towards the US Dollar.

SP 500 Daily Chart

The S&P 500 has dipped a little since our last check-in. The increase in negative sentiment has probably affected it. The Cboe Volatility Index has risen a little too, suggesting some volatility is in the market.

The USA Unemployment Claims just reported worse than expected results too. 793k compared to the expected 755k. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A low unemployment rate is an indicator of a healthy functioning economy, while a high unemployment rate suggests a challenging economic climate. Investors are particularly sensitive to employment data due to the pandemic. There is a concern about the loss of jobs.

We need to be on a lookout. If negative economic releases continue for the US dollar, the negative sentiment may accumulate and exert a stronger effect.

Across the Atlantic, the EUR EU Economic Forecasts struck a mostly positive tone. The Winter 2021 Economic Forecast projects that the EU economy will grow by 3.7% in 2021 and 3.9% in 2022. It is estimated to reach its pre-crisis levels of output earlier than expected. This comes as growth momentum projected for the second half of 2021 and in 2022 is stronger than expected.

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