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EUR/USD Forecast Update: Consolidation in progress

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Latest Premium Anlaysis Update: Retail Sentiments Analysis 4 May 21. View Anlaysis

The EUR/USD is currently testing the resistance of 1.19.

EURUSD Daily Chart

Technical Analysis

In the EUR/USD daily chart above, we see the currency pair consolidating within a narrow range.

In our weekly forecast, we mentioned about the current region and its significance back in September 2020.

As the EUR/USD tries to find its bearing in the days ahead, it will be prudent to note that the middle bollinger band may function as a support while the upper bollinger band may synergize with 1.2 to form a strong resistance.

Sentiment Analysis

SP 500 Daily Chart

Looking at the S&P 500 chart above, we can see that the S&P 500 dropped slightly on Monday. Having said so, there is nothing to suggest that the presence of risk-seeking appetite, which translates into reduced risk aversion, has changed. Hence we will continue to see minimal upside contribution to the USD from traders seeking safer assets.

The Cboe Volatility Index remains below 17. As an indicator of volatility, this means that the market is now less volatile.

The USA CPI is due to be released in a few hours. It is important because the price of consumer goods is a significant component of inflation. If inflation is high, a central bank may increase the interest rate to mitigate the situation. Speculations of an interest rate hike may generate demand for the currency. It is expected to report 0.5%. Any unexpected development may spur momentum.

Our latest Retail Sentiment analysis for members is ready. Based on the data, the EUR/USD may be experiencing a change. This has implications for your forex planning, so do log in to view immediately.

The Week Ahead

There are many 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.

Any development that dampens the prospects of the euro area may tip the price action back towards a bearish trend.

USA Fed Chair Powell Speech
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 30-y Bond Auction
The resulting bond yields may provide insights into the investors’ expectations towards future interest rate conditions. The amount of demand may also provide insights into the investors’ confidence towards the respective currency and economy.

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.

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 Core Retail Sales
USA Retail Sales
Retail sales is a fundamental component of the economy. As consumers spend, it translates to revenue and flows upstream as salaries, wholesales purchase, production orders and so on.

USA Philly Fed Manufacturing Index
This survey of manufacturers is important as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and with the activities of the businesses, downstream benefits will happen such as employment and investment.

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 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.

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