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EUR/USD Forecast 28 Jan 21

It is time for another EUR/USD update.

Sentiments have changed over the last few days. It is important that we understand what is happening.

EUR USD Daily Chart

Technical Analysis

Bearish pressure is high. We see the EUR/USD battling the 1.21 region after failing to capture 1.22. A decisive break will open up 1.2 as the next support.

The currency pair is now within the lower and middle bollinger bands. These will probably function as immediate support and resistance, respectively.

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

SP 500

Risk aversion is high as heightened volatility sparks a rush to cover exposed positions. The US Federal Reserve left rates unchecked, and there was no sign of any new stimulus for the market. Tech earnings were a mixed bag. Apple reported great results while Facebook issued warnings on profit.

Looking at the S&P 500 chart above, we see the correlation between it and the EUR/USD. If you are a regular reader, this current US dollar strength will not come as a surprise to you. Risk aversion resulted in a flight to safer assets.

Moments earlier, we saw the USA Advance GDP slightly lower than expected, coming in at 4% instead of 4.2%. I think it will probably not affect sentiment much considering that it is still positive and close to estimates. USA Unemployment claims reported less than expected, which is positive. 847k people filed for unemployment instead of 880k. However, the current levels are still high compared to pre COVID-19 numbers.

It is crucial to monitor the equity markets. The Cboe Volatility Index which is referred to as a gauge of risk by many investors has spiked significantly, suggesting the possibility of choppy waters ahead.

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.

EUR German Preliminary GDP
Gross domestic product is a measure of the monetary market value of all the goods and services produced. It is an overall measure of economic activity and health and thus wields influence on the home currency.

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