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EUR/USD Forecast 2 Feb 21

I wanted to get an update out quickly to you.

Remember I mentioned about an increase in risk aversion? While last week saw some bullish pressure towards the end, the bears are back.

EUR/USD Daily Chart

Technical Analysis

In this EUR/USD daily chart, we see the currency pair pushing against the lower bollinger band. It is attempting to test the strong technical and sentiment region of 1.2. We last saw this level in November 2020.

A longer-term outlook for any bearish ambition will probably see the EUR/USD push for the 1.18 region. It was a previous region of price action as seen on the chart.

Sentiment Analysis

S&P 50

While the S&P 500 was last seen in a recovery, make no mistake. With the current volatility at an elevated level, this may be just market noise.

The verdict on the GameStop situation is not out. As brokerages take up positions on either side of the fence, uncertainty will probably continue to generate volatility.

It is crucial to monitor the equity markets. The Cboe Volatility Index which is referred to as a gauge of risk by many investors remains higher than last week, suggesting the possibility of choppy waters.

The USA ISM Manufacturing PMI released on Monday reported 58.7 instead of the expected 60. 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.

A military coup has happened in Myanmar and Aung San Suu Kyi has been detained. The situation is still unfolding and we need to monitor it. Investors are sensitive to sovereign developments as any political changes may have significant impact on the country’s economy.

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 ADP Non-Farm Employment Change
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.
ADP’s statistics are based on the payroll data of approximately 400,000 U.S. business clients. Therefore, it is viewed by many as a possible early indication of the US Non-Farm Payroll result.

USA ISM Services 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.

USA Average Hourly Earnings
Consumer earnings is important due to it’s upstream impact. With more earnings comes possible increased consumer spending. This translates to revenues, leading to employment and business expansion.

USA Non-Farm Employment Change
USA Unemployment Rate
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.

The US Non-Farm Payroll is basically data released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:

– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees

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