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EUR/USD Forecast Update 9 Jan 20

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The EUR/USD has slipped towards the downside and is now consolidating at the moment.

Technical Analysis

On the 15 minutes chart, the EUR/USD has been ranging within the bollinger bands for a few hours. It is now testing the lower bollinger band support.

On the hourly chart, the consolidation of the EUR/USD can be seen. The 1.11 region will likely be a support followed by the lower bollinger band. If bullish pressure returns, the middle bollinger band will likely be  a resistance.

On the 4 hourly chart, we see a bigger picture of the current down trend from 1.12. The current region is a significant support as evident from the price action in December.

Lastly looking at the daily chart, we see a different perspective as the candle indicates a bullish day. This is the reason why we always need to analyse different time frames to get a better understanding of the market undertones.

If the bearish momentum picks up, the current bullish stance on the daily may fizzle out. We need to continue to monitor the shorter time frames.

If bullish pressure prevails, the immediate resistance will likely be the middle bollinger band followed by the strong sentiment and technical region of 1.12.

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 US ISM Non-Manufacturing PMI and US ADP Non-Farm Employment Change were both better than expected.

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.

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. In view of the better than expected release, investors are likely to expect a similar positive outcome for the upcoming US Non-Farm Payroll.

Tensions from the US – Iran crisis appears to be lowering for now. This likely resulted in more risk appetite which translate to some upside pressure for riskier assets such as the Euro currency. It was also reported that phase 1 of the US China Trade Deal is to be signed on Jan 13. This reduces the apprehension surrounding this geo politcal crisis and will like translate to an increase in risk appetite. Many equities markets around the world are rallying now.

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

USA 30 Years Bond Auction
The resulting bond yields may provide insights into the investors expectation towards future interest rate conditions. The amount of demand may also provide insights into the investors’ confidence towards the respective currency and economy.

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

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

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.

Following an economic calendar is vital so that your forex trading plan factors in the events. Members can log in to their dashboard for an economic calendar. The latest Major Currency Pairs, USD Index, Gold, Crude Oil and Price Action Bias Signals analysis are available too.

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Traders should always practice proper money management and seek to understand the underlying tones for the market.

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