The EUR/USD is currently bearish and below the strong sentiment and technical region of 1.08.
Technical Analysis
On the EUR/USD hourly chart, we can see the breach of 1.08 that happened a few hours ago. Support and resistance regions usually exert a “pull back” influence and hence we cannot assume that this is a resumption of bearish momentum. If the EUR/USD closes the week below 1.08, traders may switch positions and push the currency pair closer towards a continuation of the bearish decline.
Looking at the EUR/USD daily chart, we can see the current attempt of the currency pair to decisively breach the strong sentiment and technical region of 1.08. As mentioned, a closure of the week below 1.08 may tilt sentiment towards the downside.
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. An extended bearish target will be the previous low from March. 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 various purchasing managers surveys reported by the Euro Zone were all worse than expected. The 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. The general negativity in this series of releases are likely adding negative sentiment towards the euro currency.
It was reported that the European Central Bank adopted new temporary easing measures to mitigate the impact resulting from the economic fallout of the COVID-19 pandemic crisis. With an increase in the supply of funds, this will inevitably add downside pressure on the euro currency.
The US Unemployment Claims continue to paint a bleak outlook as it turns out to be worse than expected. Many analysts are cautioning on the employment impact and expect a sharp increase in the unemployment rate.
Find below a number of the significant economic events that are expected for the week. ( Not in chronological order )
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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