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EUR/USD Forecast Update 18 Feb 20

The EUR/USD is currently trading in a limited range since the start of the week.

Technical Analysis

On the hourly chart, the EUR/USD has breached the middle bollinger band. It remains to be seen if the new conquest will be held on to. Any upside attempt to move out of the range will need to face the upper bollinger band.

A return of bearish momentum will likely see support at the lower bollinger band and the strong sentiment and technical region of 1.08.

Looking at the daily chart, we can clearly see the limited range for the past two days. The lower bollinger band is currently stretched towards the downside due to the bearish pressure. There is a natural tendency for the bollinger bands to normalize and hence the price action is likely receiving upside pressure.

The bearish momentum has also weaken due to the EUR/USD being in the vicinity of 1.08. As this is a region of strong sentiment and technical influences, it is not unexpected for investors to close their positions so as to secure their profits. This usually weakens the bearish momentum.

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 had turned out to be much worse than expected. Clocking in at 8.7 instead of the expected 20, this development likely punched a hole in the sentiments towards the Euro currency. 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.

We are expecting a number of US economic releases towards the middle of the week. The performance of these statistics will likely attract comparison against the Euro zone. High impact events such as monetary policy meeting minutes are also scheduled to be released.

Find below a number of the other significant economic events that are expected for the week.

USA FOMC Member Kashkari 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 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 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 FOMC Meeting Minutes
EUR ECB Monetary Policy Meeting Accounts
Monetary policy meeting minutes are given much attention by analysts and investors as it has an impact on the economy. The minutes will be analysed thoroughly for insights on the economic policy ahead. Significant volatility may be generated if there are unexpected revelations.

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.

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.

EUR French Flash Services PMI
EUR French Flash Manufacturing PMI
EUR German Flash Manufacturing PMI
EUR German Flash Services PMI
EUR Flash Manufacturing PMI
EUR Flash Services PMI
USA Flash Manufacturing PMI
Purchasing Managers’ Index is a survey of purchasing managers and is important as the sentiment of purchasing managers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well while a cautious sentiment may see less business activities due to prudence.

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