Previously, I mentioned the strong bearish push on 1.2. This came as the ADP Non-Farm Employment Change turned out to be much better than expected. However, it rang alarm bells for me because it would push up expectations for a similar US NDP. I warned of possible impact should the data disappoint.
In this EUR/USD daily chart, we see the currency pair testing the middle bollinger band and region of 1.21. There was a reversal in momentum since last Friday.
I mentioned that price action outside of the bollinger bands usually faces pressure for a return to within. This likely contributed to the reversal. I will cover the primary reason in the sentiment section.
The EUR/USD is now at a crossroad. Both the support of 1.2 and resistance of 1.22 are regions of technical attraction. Look to the sentiment for clues.
The US NFP turned out to be worse than expected. It reported the creation of 49K jobs instead of the expected 85K. Remember the risen expectation because of the ADP? It struck deep, triggering an exodus from the US dollar. In our US NFP premium analysis, it is clear across all currency pairs under our coverage. Members should log in now to review it.
The S&P 500 continued its ascend since our last update. The Cboe Volatility Index is somewhat flat, indicating the absence of major volatility.
Brent oil remains above $60 USD, and all indications suggest a good risk appetite.
Our latest correlation report for premium members highlighted a break from the norm. The S&P 500 continues to climb while gold and the US dollar drops. This is not unexpected, with the likes of the optimistic ADP report triggering US dollar demand. We need to monitor ongoing sentiment to ascertain the impact of the disappointing US NFP. Members should log in to review the correlation status.
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 Core CPI
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.
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.
USA Fed Chair Powell Speaks
Speeches may reveal new insights into economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.
EUR EU Economic Forecasts
Economic forecasts are important and monitored by traders and analysts. The idea is to obtain insights into possible future economic policies and conditions. Volatility may increase, especially when the actual data is not as per expectations.
USA Unemployment Claims
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.
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