The EUR/USD is currently bearish. It has been bearish since the start of the new forex trading week.

Technical Analysis

On the hourly chart, the EUR/USD is drifting towards the downside after having a steeper gradient a day ago. There is an upper trend line for the current momentum and we need to monitor to see if it will continue to hold. A possible immediate target for the bearish price action may be the region of 1.1035 as shown by the horizontal red line.

Further bearish pressure may see the currency pair test the strong sentiment and technical region of 1.1.

Looking at the daily chart, we note that the EUR/USD is bearish since the start of the week. The currency pair was rejected by the middle bollinger band and is now almost half way towards the lower bollinger band.

The middle and lower bollinger bands are likely areas of support and resistance. This means that the currency pair still has some space to maneuver on both sides of the trade.

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

Gold is currently bearish and have eased from the previous high. This suggests lower levels of risk aversion for the moment. Having said so, sentiments may change at an instant and hence this is a financial asset that we need to always have an eye on. The current Wuhan virus crisis remains a critical global emergency.

Earlier, the US ISM Manufacturing PMI came out better than expected. It reported 50.9 instead of 48.5. The 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. A value above 50 indicates expansion and this has likely added some positive sentiment towards the US dollar.

Here are a number of the significant economic events that are expected.

EUR ECB President Lagarde Speech
Speeches may reveal new insights to economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.

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 Crude Oil Inventories
Movement of oil supply may bring insights to the level of general economic activities. For example, an increasing supply may suggest excessive production or diminishing demand. A reducing supply on the other hand may suggest an economic pick up.

EUR EU Economic Forecasts
Economic forecasts are important and monitored by traders and analysts. The idea is to obtain insights to possible future economic polices and conditions. Volatility may increase, especially when the actual data is not as per expectations.

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
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

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EUR/USD Forecast Update 4 Feb 20

Technical Analysis

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