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EUR/USD Forecast Update: A Lack of Dominant Pressure for Now

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Latest Premium Anlaysis Update: Retail Sentiments Analysis 3 Aug 21. View Anlaysis

A test was made on the strong support and resistance region of 1.2.

EURUSD Daily Chart

Technical Analysis

In the EUR/USD daily chart above, we see a failed attempt to test 1.2.

The subsequent price action saw it recover towards the upside.

It is important to note that the middle bollinger band is in the vicinity and hence it may add to the strength of the 1.2 support.

Sentiment Analysis

SP 500 Daily Chart

Looking at the S&P 500 chart above, we can see that equities are still somewhat flat. However, nothing indicates the end of risk-seeking appetite and hence we will probably see minimal upside contribution to the USD from traders seeking safer assets.

The Cboe Volatility Index is now above 19. As an indicator of volatility, this suggests that volatility increased. We are warier of big changes in the index, but slight changes as such can provide good peripheral information. If it continues to climb, we may experience choppy markets.

The USA ISM Manufacturing PMI reported lower than expected results. It came in at 60.7 instead of 65. As a survey of purchasing managers, it is important as their sentiment is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well, while a cautious sentiment may see fewer business activities because of prudence. While this likely dampened sentiment towards the US dollar, the US Federal Reserve Chair Powell said that the US economy is reopening, bringing in stronger economic activity and job creation. Hence positive sentiment towards the US dollar probably increased, swaying the EUR/USD towards the downside.

The latest Retail Sentiment Analysis is in line with the current forex climate. It has served as a useful peripheral insight so far, and I recommend monitoring it closely. Members do log in now to view the latest update and our comments.

With the presence of the strong support region of 1.2, we may require a significant economic event to kick-start significant price action. The USA ADP Non-Farm Employment Change is due next. ADP’s statistics are 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. It is expected to report 872k new jobs. Any deviation from that may trigger volatility, especially if the difference is significant.

The Week Ahead

There are a number of important economic events this week. I highly encourage you to read through and learn about these events. This helps improve your understanding of the market sentiment.

The US Non-Farm Payrolls is due this week and it is a major barometer of the US economy. Expect significant volatility if anything unexpected happens. The forecast is an addition of 975k jobs. Investors and analysts will closely monitor this event.

Find below a number of the economic events (not in chronological order).

EUR ECB President Lagarde Speech
Speeches may reveal new insights into economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.

USA ISM Services PMI
A 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 fewer business activities because of 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 are 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 Crude Oil Inventories
This gives insight into the supply and demand of oil, which may tell us more about the economy’s health. An expanding economy typically uses more oil, while a contracting one may result in significant excess.

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, while a high unemployment rate suggests a challenging economic climate.

USA Average Hourly Earnings
Consumer earnings is important because of its upstream impact. With more earnings comes possibly 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

 

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