The EUR/USD is currently bullish.
Technical Analysis
On the EUR/USD hourly chart, we can see a bullish momentum that begin about half a day ago after bearish pressure failed to overwhelm 1.08. It has reached the immediate resistance region of 1.09 and is currently testing it.
If 1.09 falls, the next resistance will likely be 1.095 followed by the strong sentiment and technical region of 1.10. On the other hand if a bearish recovery happens, we will probably see the middle bollinger band function as an immediate resistance, followed by the strong sentiment and technical region of 1.08.
Looking at the EUR/USD daily chart, we can see the middle bollinger band in the vicinity of 1.095. This region will likely function as a resistance if the currency pair continues to climb.
In our EUR/USD weekly forecast, we mentioned about the possibility of the strong sentiment and technical region of 1.1 to function as a pivot, especially if the currency pair fails to make further significant downside progress. We saw that the recent failure of the bearish pressure to punch through 1.08 has resulted in a surge of upside momentum. If the pivot scenario unfolds successfully, we may see an attempt on 1.1.
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 Cboe Volatility Index has fallen below 50. As equities rallied across Asia and Europe, the S&P 500 looks poised to be bullish for the second day in a row. This is significant because recent currency flows as a result of massive equities positions being taken or liquidated is exerting an impact on the EUR/USD. We last saw the US dollar strengthen as stocks value plummeted. If the correlation continues to hold true, a rally of the US equities market may result in a loss of US dollar value. Correlation between currency pairs and financial assets may sometimes yield useful insights and you can read our correlation reports for more analysis.
It is important to understand that we are not out of the woods as far as the economic impact of the COVID-19 crisis is concerned. This may be a temporary reprieve and if economic data continues to show deteriorating signals, risk aversion may strike again. The US Unemployment Claims is due later this week and this figure will be closely monitored as the previous release was much worse than expected at 6648k. The number of unemployment claims in the upcoming release is expected to be 5000k. A worse than expected release may push sentiments closer to the realm of apprehension.
Find below a number of the significant economic events that are expected for the week. ( Not in chronological order )
USA FOMC Meeting Minutes
EUR ECB Monetary Policy Meeting Accounts
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.
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.
USA Core PPI
USA PPI
Producer Price Index is important because the price of goods sold by producers influences the downstream impact of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.
USA Prelim UoM Consumer Sentiment
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.
USA CPI
USA Core 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.
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 and Price Action Bias Signals analysis to complement your forex trading plan.
It is important to conduct defensive forex trading ( proper money management, realistic stop loss and take profits, etc ) as sentiments may shift in an instant from unexpected developments, resulting in a corresponding shift in price action.
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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