Forex Guides

EUR/USD Forecast Update 18 Dec 19

The EUR/USD has slipped towards the downside and is now consolidating at the moment.

Technical Analysis

On the 15 minutes chart, the EUR/USD has been ranging within the bollinger bands for a few hours. It is now in the middle with space on both sides.

On the hourly chart, the EUR/USD appears to be on a gradual bullish momentum. Similarly, it still has space for price action on both sides.

On the 4 hourly chart, we see a bearish decline followed by the current bullish candle. The middle bollinger band is right above and may exert resistance to any bullish price action.

Lastly looking at the daily chart, we see the EUR/USD easing after two days of bullish price action.

Should bearish momentum pick up, we may see increasing support pressure as we get closer to the 1.11 region. The middle bollinger band close by may also function as a support. Beyond that, the strong sentiment and technical region of 1.1 awaits.

If bullish momentum returns, we will likely face resistance near the lower bollinger band as it is also a region of resistance back in October. Beyond that, the strong sentiment and technical region of 1.12 awaits.

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 various PMIs for the Euro Zone reported on Monday were a mix of mostly flat and red figures. This was likely neutral towards the price action.

The US Building Permits came out better than expected, reporting 1.48m ( annualized ) new residential building permits instead of the expected 1.41m. This adds to the gradual rising trend since 2011. 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. This adds to the prevailing perception of a better US economy versus the Euro Zone.

While the German Ifo Business Climate was better then expected, reporting 96.3 instead of 95.6, one may be wondering why was the euro reaction rather muted. It is important to understand the undertones of the market and a closer inspection of the statistics will reveal that while positive, it is far off from the high of 117.6 back in 2018. The opening of the US market may give us some insights to whether is this sentiment the same across both sides of the Atlantic.

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 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.

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 PCE Price Index
The Personal Consumption Expenditures index is similar to the Consumer Price Index but it focuses on individuals. It is a component of inflation and if inflation is high, a central bank may increase interest rate to mitigate the situation.

USA Personal Spending
While Personal Spending is similar to Retail Sales, it focuses on consumers. It is a fundamental component of the economy because 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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