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EUR/USD Forecast Update 21 Jan 20

The EUR/USD is currently on a bullish breakout.

Technical Analysis

On the 15 minutes chart, the EUR/USD has risen above the normal range for the past few hours.

On the hourly chart, we see the bullish spike and it is testing the region of the upper bollinger band.

On the 4 hourly chart, we see a bigger picture of the current bullish spike. The current region of price action was previously a support and resistance level too. You can see it manifesting on 7 Jan. The bullish momentum will need to overcome both the support and resistance region of 1.11 and the middle bollinger band.

Lastly looking at the daily chart, we note that the EUR/USD is bullish for the week. The currency pair has started the ascent from last week’s closing since Monday. It is impossible to see with certainty how this goes for now as we are having a number of developing scenarios. Furthermore it is in the middle of the lower bollinger band and hence has space for maneuvering towards the upside or downside.

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

Many equities markets are encountering some risk aversion due to the escalating situation of the new virus in China. Human to human transmission has been confirmed by China and the virus is appearing in new countries. Having said so, gold which is usually an asset sought after during times of risk aversion, has eased down from it’s earlier high. Nonetheless, this is a highly liquid situation and hence it will be prudent to follow the developments.

Earlier, the EUR German ZEW Economic Sentiment came out much better than expected. It reported 26.7 instead of 15.2. 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. The spike of the EUR/USD was likely a sentimental reaction to this development.

The World Economic Forum is currently underway and any unexpected insights may trigger volatility.

Here are a number of the significant economic events that are expected.

EUR Main Refinancing Rate
A high interest usually generates demand while a low interest may result in the dumping of the currency for better yielding alternatives. Therefore the interest rate result usually has a significant impact, especially when it is an unexpected result.

EUR Monetary Policy Statement
Monetary policy statements 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.

EUR ECB Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.

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.

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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