In our previous update, we observed an increase in risk appetite across various financial assets. The S&P 500 had climbed 3 days in a row then. This might result in the reversal of previous price action seen when risk aversion was high.
Looking at the EUR/USD daily chart above, we see a bullish currency pair in early week trading. This continues the bullish recovery seen late last week.
The current region often provides resistance as seen back in Jul to Sep 2020. Therefore we may see some stall in momentum and the next resistance is likely to be the upper bollinger band / 1.19. if an extended bullish push occurs, we expect to see 1.2 as a target. Considering the strong technical and sentiment value of 1.2, it may put up significant resistance.
If the bearish pressure manages to take over, 1.18 and the middle bollinger band will likely offer support. This is followed by the lower bollinger band and the strong sentiment and technical region of 1.16.
In early week trading, global stocks are bullish. This suggests a continuation of risk appetite which may carry over to the US session. Gold remains below $1900 for now and this indicates the absence of massive demand due to risk aversion.
The US Presidential Election did not affect the currencies market significantly. There are reports claiming that the Trump administration’s actions suggest that it has recognized its defeat. Any prospect of a return to normalcy will likely be met with further positive sentiment.
The US Retail Sales is due tomorrow and it is expected to report 0.5%. There will be much attention on it as financial analysts and investors are keen to look out for signs of impact or recovery from the COVID-19 pandemic. The situation remains precarious as COVID-19 continues to spread. Retail sale 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.
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