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EUR/USD Forecast Update 5 May 20

The EUR/USD is currently bearish.

Technical Analysis

eur usd hourly chart

On the EUR/USD hourly chart, we can see a bearish momentum which appears to be a continuation of the bearish slide that developed late last week. The price action is now slowing down as the currency pair approaches the strong sentiment and technical region of 1.08.

eur usd daily chart

Looking at the EUR/USD daily chart, we can see the significant intensity of the bearish pressure as the currency pair took down 1.09 and the middle bollinger band with relative ease.

1.08 would be a crucial region to monitor as it is a major point of sentiment and technical importance. It is also a key support level to break if the EUR/USD is attempting to return to the daily bearish trend line from Mar 2020.

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 German Constitutional Court had ruled that the quantitative easing measures taken by the European Central Bank to support the troubled Euro Zone economy is a partial violation of the German constitution. The ECB has been given 3 months to provide a valid explanation after which, the Bundesbank may pull out of the existing monetary easing supports.

Investors are averse towards political issues and with the court ruling having a possible direct impact on the Euro Zone, negative sentiment towards the euro zone and by extension it’s currency likely increased.

The US ISM Non-Manufacturing PMI is due to be released soon. As 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. The result is expected to drop but as always, any deviation from the expectation may introduce new sentiments and respective momentum to the EUR/USD.

We are seeing continued uncertainty towards the EUR/USD from our Forex Sentiment Analysis. Members should log in for the latest updates and factor that in your forex trading plans.

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. A much anticipated event will be the US Non-Farm Payroll as recent unemployment claims point to an employment climate that is significantly affected. 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.

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.

US Unemployment Claims
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

The Bottom Line

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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