The EUR/USD is currently bearish.
Technical Analysis
On the EUR/USD hourly chart, we note that the currency pair has generally been drifting towards the downside below the middle bollinger band since the start of the week. Considering the somewhat gentle nature of the descend, sentiments are likely not in the extremes.
The strong sentiment and technical region of 1.1 has been breached and the upcoming supports are likely to be 1.09 and 1.08.
On the other hand, if a bullish recovery happens, the price action will probably face resistance at 1.1 / middle bollinger band, followed by the upper bollinger band.
Looking at the EUR/USD daily chart, we can see the bearish momentum since the start of the week. It is evident that while sentiments are not in the extremes, it is clearly bearish. The currency pair has broken through the middle bollinger band and 1.1.
From a technical point of view, there is a possibility that the 1.1 region will exert pivotal influence. If indeed, we should see increasing bullish pressure.
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
Equities appear to have seen the worst as volatility subsides. The Cboe Volatility Index has dropped below 60. This is likely having a calming effect on sentiments. While gold remains above $1600, it is currently not making any bullish push. We may be witnessing a momentary pause of significant price action as analysts and investors try to make sense of the various support measures by governments and central banks in view of the COVID-19 crisis.
We have a couple of important economic data releases for the US due shortly, the USA Chicago PMI and USA CB Consumer Confidence. A 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. Consumer surveys are also important 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.
While both of the releases are expected to be worse than the previous releases, the market is currently sensitive towards any unexpected development. If the results are worse than the estimates, apprehension may kick in leading to negative sentiment and increased volatility. As we begin receiving economic data affected by the COVID-19 crisis, we need to be on top of the resulting effect on sentiments.
We track the ratio of long and short positions in our premium analysis and we continue to see a drop in long positions for the EUR/USD. A contrarian approach will see the increased possibility of the bullish trend. Members should log in now to their dashboard to see the latest forex sentiment analysis.
Find below a number of the other significant economic events that are expected for the week. ( Not in chronological order )
USA ISM Manufacturing PMI
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.
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
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.
Invest in yourself and get premium analysis for less than 20 cents a day. Our signature knowledge based approach will help you understand the markets better.
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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