The EUR/USD is currently experiencing an upside surge.
Technical Analysis
On the EUR/USD hourly chart, we can see a bullish breakout from the narrow range. The immediate target and resistance will be the strong sentiment and technical region of 1.10. On the other hand if the bullish breakout fizzles, we will probably see the price action fall back within the narrow range. Any extended bearish price action will likely be seeking to test the strong sentiment and technical region of 1.08.
Looking at the EUR/USD daily chart, we can see the currency pair attempting to gain a foothold above the middle bollinger band.
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. The current technical situation appears to be inline with the pivot scenario. We need to monitor closely to see if the EUR/USD manages to maintain it’s value above the middle bollinger.
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
In our previous update, we reiterated the importance of observing the equities market. 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.
The S&P 500 is rallying as of now and we are of the opinion that it is likely one of the influences of the current EUR/USD surge.
The US Unemployment Claims came out to be worse than expected. Instead of 5000k, it turned out to be 6606k . Having said so, it is lower than the previous amount which was revised even higher at 6867K. While a number of investors might be relieved that it was lower than the previous, there is a troubling side of it as reports are stating that the past 3 weeks resulted in a 10% loss of the American workforce. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A high unemployment rate is an indicator of a troubled economy.
As Friday will be the Good Friday holiday for some, volume may be light and hence the price action may exhibit increased volatility due to lower liquidity.
Find below a number of the significant economic events that are expected for the week. ( Not in chronological order )
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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