The EUR/USD is currently bearish.
On the EUR/USD hourly chart, we note that the bearish slide continued on from our last update. 1.08 has been breached and now the currency pair is experiencing some consolidation price action. Considering the current critical low region where many forex positions likely overlap, it is important to monitor the EUR/USD on the smaller time frames so as to ascertain the price momentum.
Looking at the EUR/USD daily chart, we can see the sharp pull back from the upper bollinger band at the 1.14 region. The currency pair is now testing the lower bollinger band.
On this longer time frame, we can see the EUR/USD making a new lower low. Back in February, the currency pair merely scratched 1.08. As mentioned, the current price level is critical as the influence of 1.08 is significant. We may see some consolidation before any new insights on the directional momentum arrive.
A continuation of the bearish momentum will likely face support at the lower bollinger band. Any bullish recovery will likely face the support turned resistance region of 1.08 before heading on to 1.09.
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
Equities worldwide are losing significant value as a result of the COVID-19 crisis. Sentiments are high and volatile, adding significant risk to forex trading activities.
In the last update, we reported that the German ZEW Economic Sentiment turned out to be much worse than expected. The forecast was -29.7 which is already a bad enough indication of pessimism but it turned out to be -49.5% instead! Germany is a major economy in the Euro Zone and this likely gave sentiment for the euro a big hit. Having said so, things didn’t stop there. The European Central Bank announced a Pandemic Emergency Purchase Program to support the region during it’s time of need. This program will be purchasing private and public sector securities. This quantitative easing measure results in a flood of supply for the euro currency and inevitably results in a loss of value.
Both the US Philly Fed Manufacturing Index and US Unemployment Claims turned out to be worse than expected. While these will likely add negative sentiment for the US dollar, the COVID-19 crisis is probably overshadowing all market dynamics for now as risk aversion is swamping the markets. Keep a look out to see if it will bring some relief for the euro currency.
The Bottom Line
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.
If you ever bought an expensive EA that doesn’t work, why not invest in yourself and spare 20 cents a day for premium analysis. Understand the markets better with our signature knowledge based approach!
It is critical to conduct defensive forex trading ( proper money management, realistic stop loss and take profits, etc ) as sentiments may change in an instant from unexpected developments, resulting in a corresponding price action shift.
Traders should always practice proper money management and seek to understand the underlying tones for the market.