The EUR/USD is still bullish.
Technical Analysis
On the EUR/USD hourly chart, we note that the currency pair has continued to drift towards the upside within the upper bollinger bands. The ascension remains somewhat gentle, suggesting that sentiments are not in the extremes.
The EUR/USD did not regain a foothold below 1.08 and has surpassed 1.09. If the bullish channel holds, the next resistance is likely to be 1.10.
A bearish recovery will likely see the middle and lower bollinger bands function as immediate supports followed by the strong sentiment and technical region of 1.08.
Looking at the EUR/USD daily chart, we can see the currency pair’s attempt to regain some sense of an equilibrium. The 1.1 region is likely the pivot for the current swing between 1.14+ to 1.06+.
After breaching 1.09, additional bullish commitments were likely made which resulted in an attempt to test 1.1. It is important to drop down to shorter time frames so as to ascertain the status of the price action. A failure to make an meaningful attempt on 1.1 may result in a resurgence of bearish commitment and thus sending the EUR/USD down towards 1.09 / 1.08.
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
As the economic impact of the COVID-19 crisis starts to show up in the economic figures, analysts are working to get a pulse of the situation. The US Unemployment Claims turned out to be significantly worse than expected. Instead of 1648k, it turned out to be 3283k. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A high unemployment rate is an indicator of an economy in distress. With more than 3 million of unemployment claims, negative sentiment towards the US economy likely increased.
While the S&P 500 seems to be recovering for now, a number of analysts are cautioning that it may be a bear market rally. The Cboe Volatility Index which is an indicator of the market volatility remains elevated above 60. A return of drastic price movement in the equality markets may trigger a corresponding ripple in the currency markets again.
Find below a number of the other significant economic events that are expected for the week.
USA Core PCE Price Index
The Personal Consumption Expenditures index is similar to the Consumer Price Index but it focuses on individuals. It is a component of inflation and if inflation is high, a central bank may increase interest rate to mitigate the situation.
USA Personal Spending
While Personal Spending is similar to Retail Sales, it focuses on consumers. It is a fundamental component of the economy because as consumers spend, it translates to revenue and flows up stream as salaries, wholesales purchase, production orders and so on.
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.
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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.
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