The week has been bearish so far. Now that the middle bollinger band is broken, we need to consider the next possibilities.
In this EUR/USD daily chart, we see the currency pair break below the middle bollinger band. This opens up the path for a test on 1.2.
The synergy of the lower bollinger band and 1.2 may result in a strong support.
I warned of a possible resistance in the 1.2150 region as seen back in Nov / Dec 2020. This indeed happened and should a bullish recovery return, we may see it function as a resistance after the middle bollinger band.
There was no significant economic release for the first half of the week. However, this changes soon as we are expecting quite a fair bit of important data. More on that below.
The S&P 500 had inched towards 3950 and eased. It appears that the market momentum to push beyond 4000 is still lacking. While the correlation with the EUR/USD obvious, with both assets over the top, the somewhat flat price action makes the determination of sentiment tricky. A wise move will be to observe other related assets.
Looking at the Brent Oil weekly chart above, we see a climb from the $20s back in April. This paints a picture of improving economic climate as markets adapt after the initial fallout from the COVID-19 pandemic.
The latest USA Retail Sales data will be released in a few hours and the forecast is 1.1%. As the previous data was -0.7%, a return to a positive figure will be much welcomed. If it does not turn out to be worse than expected, positive sentiment will likely be generated as investors gain confidence in the economic recovery. Considering that retail sales is a fundamental component of the economy. It will be closely monitored. As consumers spend, it translates to revenue and flows upstream as salaries, wholesales purchase, production orders, and so on.
The Week Ahead
There are important economic events this week. I highly encourage you to read through and learn about these events. This helps improve your understanding of the market sentiment.
USA FOMC Meeting Minutes
Monetary policy meeting minutes are given much attention by analysts and investors as it has an impact on the economy. The minutes will be analyzed thoroughly for insights on the economic policy ahead. Significant volatility may be generated if there are unexpected revelations.
USA Philly Fed Manufacturing Index
This survey of manufacturers is important as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and with the activities of the businesses, downstream benefits will happen such as employment and investment.
USA Crude Oil Inventories
This gives insight into the supply and demand of oil, which may tell us more about the economy’s health. An expanding economy typically uses more oil, while a contracting one may result in significant excess.
EUR French Flash Services PMI
EUR French Flash Manufacturing PMI
EUR German Flash Manufacturing PMI
EUR German Flash Services PMI
EUR Flash Manufacturing PMI
EUR Flash Services PMI
USD Flash Manufacturing PMI
A Purchasing Managers’ Index is a survey of purchasing managers and is important as the sentiment of purchasing managers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well, while a cautious sentiment may see fewer business activities because of prudence.
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