The EUR/USD is currently bullish.
Technical Analysis
On the EUR/USD hourly chart, we can see that the strong sentiment and technical region of 1.12 has been breached. If the currency pair manages to hold on to this beachhead, we may be looking at further upside gains.
If a bearish recovery develops, the EUR/USD will probably face support at the middle and lower bollinger band, followed by 1.1.
Looking at the EUR/USD daily chart, we can see that the currency pair is now testing a significant source of resistance. It failed to breach 1.12 late last year but succeeded back in March. Considering that 1.12 is an important sentiment and technical region, we cannot assume that a particular scenario will develop. It will be prudent to drop down to the shorter time frames so as to monitor closely.
If the bullish momentum succeeds, this suggests that the price action is significant. 1.13 will likely be the next resistance, followed by an extended target of 1.14.
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 current sentiment in the market is likely to be risk seeking as the usual indications check out. We are seeing most equities rallying, the price of oil is up while price of gold is down. Tracking correlation in forex trading is useful and often provides insight. Having said so, it is important to note that the current market situation is probably sentimental in nature. Many businesses and industries are experiencing bleak outlooks. Should the economic situation deteriorate further, the realization may impact sentiment and cause a shift in expectations.
In layman terms, this means that the current rally may change without any notice. Proper money management is crucial! In our premium analysis for members, we track the retail forex sentiment for the major currency pairs. On Monday, we noted a significant shift towards short positions for the EUR/USD. From a contrarian trading point of view, this is a classic example where 80% – 90% of retail forex traders fail. The report has been made available for members since Monday and hence do log in to your dashboard to review it.
The USA ADP Non-Farm Employment Change is due to be released shortly. As ADP’s statistics is based on the payroll data of approximately 400,000 U.S. business clients, it is viewed by many as a possible early indication of the US Non-Farm Payroll result. The US employment situation is facing immerse challenges and hence be careful of any unexpected developments and volatility.
The Week Ahead
There are a number of important economic releases and events for the week. Any development that may lend weight to the current apprehension may further add to the sentiment and increase the intensity of it. You can find a number of them listed below. ( Not in chronological order )
USA ISM Non-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.
USA ADP Non-Farm Employment Change
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.
ADP’s statistics is based on the payroll data of approximately 400,000 U.S. business clients. Therefore it is viewed by many as a possible early indication of the US Non-Farm Payroll result.
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 Average Hourly Earnings
Consumer earnings is important due to it’s upstream impact. With more earnings comes possible increased consumer spending. This translates to revenues, leading to employment and business expansion.
USA Non-Farm Employment Change
USA Unemployment Rate
USA Unemployment Claims
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.
The US Non-Farm Payroll is basically data released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:
– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees
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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