The EUR/USD is currently bearish.
Technical Analysis
On the EUR/USD hourly chart, we can see that the bearish momentum continued on from our last forecast update. While the intensity has now abated, this is not unexpected considering that 1.08 is a region of strong sentiment and technical considerations.
Looking at the EUR/USD daily chart, we can that the currency pair is now below 1.08. This is an important development as the longer it remains under 1.08, the higher the possibility of an increase of bearish pressure as traders hop on.
If the bearish momentum continues, we are likely to see support at the lower bollinger band and the bearish trend line / 1.07.
A return of bullish pressure will probably face resistance at the middle bollinger and 1.09, with 1.1 as a target for any extended push.
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 euro currency remains weighed down due to the ruling by the German Constitutional Court 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. Germany is a major economy in the euro zone and many are concerned that if the Bundesbank proceeds to pull out of the existing monetary easing measures, the stability of the Euro Zone will be significantly impacted.
The USA ADP Non-Farm Employment Change turned out to be slightly better than expected. If you are clueless as to why are we not seeing an increase in risk seeking momentum which the euro currency often benefits from, it all lies in the undertones of the market. A loss of -20236k jobs is significant. The resulting ripples across the broad spectrum of the US economy may be a big burden to bear.
Similarly, the latest USA Unemployment Claims indicates 3169K new claims. This is worse than the expected 3000k. It is an early indicator of the employment climate and it remains bleak. The USA Non-Farm Employment Change and USA Unemployment Rate will be released towards the end of the week. A number of analysts are of the opinion that it may not represent the full impact of the COVID 19 pandemic as time is needed before the entirely of the blow trickles down. Apprehension among investors and analysts are probably high.
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 USA 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 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
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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