The EUR/USD is currently in a consolidation with some upside bias.
Technical Analysis
On the EUR/USD hourly chart, we can see bullish pressure pushing the currency pair to the top of it’s consolidation range. The immediate target and resistance will be the strong sentiment and technical region of 1.10 and after which, 1.11.
If the bullish momentum dissipates, we are likely to see the price action fall back within the consolidation range. Any extended bearish price action will likely be seeking to push pass the previous consolidation range of 1.086 before moving on to test the strong sentiment and technical region of 1.08.
Looking at the EUR/USD daily chart, we can see the currency pair squeezed between the middle bollinger band and the strong sentiment and technical region of 1.10.
In our EUR/USD weekly forecast, we mentioned about the possibility of the strong sentiment and technical region of 1.1 to function as a pivot. We need to monitor closely to see if the currency pair will overcome 1.1 and head for higher grounds. If this happens, the possibility of a 1.1 pivot increases.
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
In the absence of any major economic release, the EUR/USD is mostly influenced by it’s correlation with the S&P 500. On Monday, the S&P 500 was down for the day and this is so for the EUR/USD too. S&P 500 futures are indicative of a bullish opening for the equities market and we are seeing bullish pressure for the EUR/USD.
The US Retail Sales is due to be released on Wednesday. Many investors and analysts will be monitoring the release for any signs of economic impact due to the COVID 19 crisis. It is predicted to show a -8% and any signification deviation may trigger sentiments.
Find below a number of the significant economic events that are expected for the week. ( Not in chronological order )
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.
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.
USA Building Permits
The construction of a building generates many economic activities. Jobs will be created for construction workers, the various sub contractors and services associated with new buildings such as power, water, furniture and so on.
USA Philly Fed Manufacturing Index
This survey of manufacturers is important as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and with the activities of the businesses, downstream benefits will happen such as employment and investment.
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 and Price Action Bias Signals analysis to complement your forex trading plan.
It is important to conduct defensive forex trading ( proper money management, realistic stop loss and take profits, etc ) as sentiments may shift in an instant from unexpected developments, resulting in a corresponding shift in price action.
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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