The EUR/USD is currently bullish.
On the EUR/USD hourly chart, we can see that the bullish momentum started right about the time when Asian markets open for business. Now that they are closed, the question remains if the bullish price action continues. A possible bullish target will be the resistance line pointed in the chart as we can see two previous interactions there.
Looking at the EUR/USD daily chart, we can see that the currency pair is facing resistance at the middle bollinger band. If the price action continues to trade in a tightening range, we may see a forex breakout.
If the bullish momentum continues, we are likely to see resistance at the middle bollinger band, 1.09, upper bollinger band and the strong sentiment and technical region of 1.1.
A return of bearish pressure will probably face support at the strong sentiment and technical region of 1.08, followed by the lower bollinger band.
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 US Federal Reserve announced that their plan to purchase exchange-traded funds will begin on May 12. This is likely fueling risk appetite as we see market assets climb, including the euro currency. From a forex point of view, we need to remain focused on the fact that easing measures usually results in a long term down side pressure on the currency.
Our latest forex sentiment analysis appears to indicate rising bullish sentiment, members should log in to view the latest analysis.
The USA CPI turned out to be worse than expected. 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. In this case, the bearish outlook will likely affect the sentiment towards the US economy. Having said so, in all financial markets including forex, it is always a scenario of bearish vs bullish expectations. It remains to be seen if the USA CPI result can punch a hole on the bullish sentiment.
The Week Ahead
There are a number of important economic releases and events for the week. Any development that may lend weight to the current apprehension may further add to the sentiment and increase the intensity of it. You can find a number of them listed below. ( Not in chronological order )
USA Core 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. Speculations of a possible interest rate hike may also generate demand for the currency.
USA Fed Chair Powell Speech
Speeches may reveal new insights to economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.
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.
EUR German Prelim 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.
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 upstream as salaries, wholesales purchase, production orders and so on.
USA Prelim UoM Consumer Sentiment
Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and hence consumers are confident. This likely leads to increased retail sales. A cautious sentiment on the other hand may see consumers spend less in view of a perceived upcoming economic crisis.
The Bottom Line
It is important to follow an economic calendar as your forex trading plans may be impacted due to shifting sentiments. Members do log in to your dashboards for the economic calendar. You should also review the latest Major Currency Pairs, USD Index, Gold, Brent Oil analysis to complement your forex trading plan.
Traders should always practice proper money management and seek to understand the underlying tones for the market. May the pips be with you!
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