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EUR/USD Forecast Update 11 Dec 19

The EUR/USD appears to be slipping towards the downside at the moment.

Technical Analysis

On the 15 minutes chart, the EUR/USD is on a downside momentum for about 10 hours now.

On the hourly chart, the EUR/USD has broken the middle bollinger band and is now stretching the lower limits. This indicates bearish inclination.

On the 4 hourly chart, we see a bearish decline since the earlier part of the day. The middle bollinger band lies ahead and it may function as a support. If it fails, the next support will likely be the lower bollinger band and the strong sentiment and technical region of 1.1.

Lastly looking at the daily chart, we see the EUR/USD easing after two days of bullish price action. It is between the upper and middle bollinger bands and thus have maneuvering space on both side of the price action. We do see a supportive influence at the current level a few days back and this correlates to the situation we see on the lower time frames. Therefore we may see some reactive support.

In forex trading, it is important that we observe all time frames to get the pulse of the current situation. Shorter time frames help to ascertain the current price action and sentiments. Longer time frames allow us to understand the momentum of the current price action and sentiments, whether if it is a sustained drive or a knee jerk reaction.

Fundamental and Sentimental Considerations

The German ZEW Economic Sentiment was much better than expected. It was reported to be 10.7 instead of the expected 1.1 and this is almost a 10 times increase. As a survey of analysts, this sentiment report holds a weight. Their sentiments may be derived from their working knowledge of the economy and hence may be an early indicator of economic health. It likely contributed to the positive risk appetite which floated up the EUR/USD.

Not to be outdone, the US Consumer Price Index came out to be 0.3% instead of 0.2%. Although the upside surprise is not as huge as the German ZEW Economic Sentiment, it adds on to the list of green lights for the US economy. The 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.

The US Federal Funds Rate event is due in a few hours. Most estimates foresee a hold at 1.75%. As always, traders and analysts will be monitoring the release closely in order to gain insights on any future policy possibilities. Any unexpected development is likely to induce volatility. The ECB interest rate event is due the next day too.

Here are a number of the significant economic events that are expected.

USA Crude Oil Inventories
Movement of oil supply may bring insights to the level of general economic activities. For example, an increasing supply may suggest excessive production or diminishing demand. A reducing supply on the other hand may suggest an economic pick up.

USA FOMC Economic Projections
Economic forecasts are important and monitored by traders and analysts. The idea is to obtain insights to possible future economic polices and conditions. Volatility may increase, especially when the actual data is not as per expectations.

USA FOMC Statement
Interest rate related statements are given much attention by analysts and investors as it has a direct impact on the currency. Investors usually favor a currency with a higher interest rate and will analyse these statements thoroughly for insights on the interest rate policy.

USA Federal Funds Rate
A high interest usually generates demand while a low interest may result in the dumping of the currency for better yielding alternatives. Therefore the interest rate result usually has a significant impact, especially when it is an unexpected result.

USA FOMC Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.

EUR Main Refinancing Rate
A high interest usually generates demand while a low interest may result in the dumping of the currency for better yielding alternatives. Therefore the interest rate result usually has a significant impact, especially when it is an unexpected result.

EUR Monetary Policy Statement
Interest rate related statements are given much attention by analysts and investors as it has a direct impact on the currency. Investors usually favor a currency with a higher interest rate and will analyse these statements thoroughly for insights on the interest rate policy.

EUR ECB Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.

USD Core PPI
USA PPI

Producer Price Index is important because the price of goods sold by producers influences the downstream impact of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.

USA Core Retail Sales
USA Retail Sales

Retail sales is a fundamental component of the economy. As consumers spend, it translates to revenue and flows up stream as salaries, wholesales purchase, production orders and so on.

Following an economic calendar is vital so that your forex trading plan factors in the events. Members can log in to their dashboard for an economic calendar. The latest Major Currency Pairs, USD Index, Gold, Crude Oil and Price Action Bias Signals analysis are available too.

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Traders should always practice proper money management and seek to understand the underlying tones for the market.

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