The EUR/USD is currently testing the strong sentiment and technical region of 1.08.
Technical Analysis
On the EUR/USD hourly chart, we can see the multiple attempts made on 1.08 over a number of days. The current price action is sandwiched between the middle bollinger band and the region of 1.08. A clean breach of either side will likely provide insights as to the direction of the current price action.
Looking at the EUR/USD daily chart, we can see the current attempt of the currency pair to breach the strong sentiment and technical region of 1.08.
The EUR/USD appears to be making a series of lower tops since Mar 2020. A successful breach of the 1.08 will increase the possibility of a bigger bearish trend. We see possible supports at the lower bollinger band and 1.07. If a bullish recovery takes hold, we expect possible resistances to be at the middle bollinger band / 1.09, followed by 1.1.
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 was reported to be much better than expected. Instead of -40, it was announced to be 28.2. 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. With Germany being a core member of the euro zone economy, this positive development should have lifted the euro currency. This is not happening at the moment and this is likely due to risk aversion. The Cboe Volatility Index has risen and equities are mostly in the red.
There is a string of purchasing managers surveys due to be released on Thursday. Barring any other unexpected developments, investors are likely looking towards these economic figures for further guidance on price action.
The percentage of forex traders shorting the EUR/USD continues to increase. Contrarians should watch this closely as a net short forex sentiment may signal possible bullish pressure. Members do log in to view the latest Forex Sentiment Analysis.
Find below a number of the significant economic events that are expected for the week. ( Not in chronological order )
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.
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.
EUR German ifo Business Climate
Business Climate surveys are influential as the sentiment of businesses 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.
USA Core Durable Goods Orders
USA Durable Goods Orders
Reports on the orders of goods are leading indicators of production and thus the level of economic activities. Increasing purchase orders suggests that manufacturers will increase activity to meet the demand, providing downstream benefits such as employment. On the other hand, decreasing orders may indicate an upcoming economic crunch.
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 analysis to complement your forex trading plan.
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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