Much has happened since we last visited the EUR/USD. Having said so, it is not something that is unexpected. The indications were there and we had spoken about it a number of times.
Looking at the EUR/USD weekly chart above, we note the upside surge beyond 1.18. The currency pair is now consolidating around the strong support and resistance region of 1.18.
Any return of the bullish momentum will likely face a synergistic resistance from the upper bollinger band and 1.19 region. On the other hand, a continuation of the bearish pressure will need to decisively breach 1.18 before making an attempt on 1.17.
We previously mentioned that a highly stretched bollinger band will face an increased technical pressure to pull back towards equilibrium. In view of the recent extended spike, the downside pull factor exerted by the bollinger band to regain control is likely significant. This may result in the continuation of consolidation or even a retracement of the bullish gains.
In our previous forecasts, we discussed the possible outcome for the US dollar due to the huge quantitative easing measures taken by the US Federal Reserve. The flood of US dollar supply will likely bring upon the basic economic reaction for such a scenario. An increased bearish pressure on the value of the US dollar.
Looking in hindsight, this is probably what had happened as we witness the shift of value towards the Euro currency and Gold. The difficulties faced by the US in it’s efforts to control the COVID-19 pandemic likely contributed to the push factor.
We have readers writing to us about their successful anticipation of the move. Nothing pleases us more than to hear of the great trades done by our readers. One of them harvested 315 pips! Well done. However, as always we will like to caution that nothing in forex is 100%. Always practice proper money management and plan your forex trades well.
The correlation between the EUR/USD and Gold provided additional insight into the market sentiment. In our previous correlation report of the EUR/USD and Gold back in early July, the correlation has not developed. However we mentioned that both assets might develop correlation due to specific market events. Both financial assets then went on to record huge surges in value due to the deterioration of the US COVID-19 situation, the US and China relationship, etc. Besides our periodic correlation reports, premium members have access to up to date reports and we may yet be seeing a new development. Therefore members do remember to log in to view the latest report. If you are not a member, consider joining at just less than $0.20 a day!
Relatively, the US employment situation did not experience an adverse meltdown. 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 while a high unemployment rate suggests a challenging economic climate. It reached a high of 14.7% unemployment in April and has eased down to July’s 10.2%. All eyes are on a sub 10% figure. Having said so, it is important to understand that the COVID-19 situation remains fluid and will likely remain so until a definite solution such as a working vaccine is available.
As the US elections draw closer, we may experience increased volatility for the EUR/USD. Investors are sensitive to political developments as there may be a significant impact on the country’s economy and currency.
The Bottom Line
It is imperative that we continue to monitor the global and region developments of the various ongoing challenges. COVID-19 remains a threat and the stand off between the US and China is bleeding apprehension into the markets. These developments have the potential to send the EUR/USD either way.
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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