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EUR/USD Forecast Update: Consolidation Continues As ADP Disappoints

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Latest Premium Analysis Update: Retail Sentiments Analysis 23 Nov 21 View Anlaysis

The EUR/USD briefly went below the strong support region of 1.2. Having said so, it had since recovered.

EURUSD Daily

Technical Analysis

In the EUR/USD daily chart above, we see a failed attempt to test 1.2 and it is now back above the middle bollinger band.

The price action mostly consists of inconsequential movement due to a lack of dominant trend.

This is in line with our latest EUR/USD Sentiment Analysis and I highly recommend you read it if you have not.

As the end of the week approaches, it remains to be since if bearish interest is able to muster enough momentum to breach 1.2 decisively.

Any bullish recovery will probably face resistance at 1.21. followed by the extended target at 1.22.

Sentiment Analysis

SP 500 Daily Chart

Looking at the S&P 500 chart above, we can see that equities are also consolidating. 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 has dropped slightly to above 18. As an indicator of volatility, this suggests that volatility remains. 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 ADP Non-Farm Employment Change reported lower than expected results. 742K jobs were added instead of the forecasted 872K. Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. 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. If the upcoming US NFP also performs worse than expected, we may see increased volatility.

It did not help the US dollar that the USA ISM Services PMI was also weaker than expected, reporting 62.7 instead of 64.2. We must be mindful that the sentiment of purchasing managers is a leading indicator of economic health.

In view of the above, the sentiment towards the US dollar was probably affected and hence the upside drift we are observing now.

ECB President Lagarde is due to speak soon and hence do ensure you practice proper money management so as to mitigate against any unexpected developments.

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 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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