The EUR/USD is currently bullish.
On the hourly chart, we observe a bullish ascension that is currently happening. In our previous update, we mentioned of an observation from the last 2 candles showing supportive influence which might cap the bearish momentum at that moment in time. Indeed, we see the EUR/USD turned around and achieved the bullish targets we mentioned previously.
If a bearish recovery occurs, we will be looking at 1.094 / 1.090 / 1.08 as possible areas of support.
Let us refer to the daily chart for insights on the current bullish momentum.
Looking at the EUR/USD daily chart, we can see the currency pair punching through the middle bollinger band. This suggests sizable upside push. If the momentum continues, the EUR/USD will likely be targeting the strong sentiment and technical region of 1.1. This has possible potential to end the month as a doji monthly candle.
A return of bearish pressure will likely target the 1.09 region as observed in this chart.
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
Earlier in the week, we noted that the German Ifo Business Climate was better than expected. It likely led to increased positive sentiment for the Euro currency. We were also looking forward to the USA CB Consumer Confidence for a sense of direction. A positive outcome would likely add demand for the US dollar while a negative outcome might add further boost to the Euro currency.
The USA CB Consumer Confidence turned out to be worse than expected, reporting 130.7 instead of the expected 132.6. Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and hence consumers are confident. This likely leads to increased retail sales. A cautious sentiment on the other hand may see consumers spend less in view of a perceived upcoming economic crisis. This development likely tilted the sentiment in favor of the Euro currency.
Furthermore, it was reported that the German government may introduce a stimulus measures in the event that the economy is affected heavily by the Covid-19 crisis. This likely injected some relief into the sentiment of the market and provided further uplift to the euro currency. We should continue to monitor the global apprehension towards the Covid-19 crisis. Gold still remains at elevated levels.
Find below a number of the other significant economic events that are expected for the week.
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.
USA Preliminary GDP
Gross domestic product is a measure of the monetary market value of all the goods and services produced. It is an overall measure of economic activity and health and thus wields influence on the home currency.
EURO German Prelim CPI
Consumer Price Index is important because the price of consumer goods is a significant component of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation. Speculations of a possible interest rate hike may generate demand for the currency.
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.
USA Chicago 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.
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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.