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EUR/USD Forecast Update: Euro pushes for resistance

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The EUR/USD is currently pushing towards the strong resistance of 1.2.

EURUSD Daily Chart

Technical Analysis

In the EUR/USD daily chart above, we see the currency pair continued on with its bullish momentum since our last update.

The upper bollinger band may synergize with 1.2 to form a strong resistance. If indeed so, the EUR/USD may return to the previous consolidation range around 1.19.

Another important point to note will be the long-term bearish momentum. We are getting near the upper trend line which may yield more insights on the path ahead. This depends on how the EUR/USD interacts with it.

Sentiment Analysis

SP 500 Daily Chart

Looking at the S&P 500 chart above, we can see that the S&P 500 continues to face pressure from the top. Having said so, there is nothing to suggest that the presence of risk-seeking appetite is gone. Hence we should continue to see minimal upside contribution to the USD from traders seeking safer assets due to risk aversion.

The Cboe Volatility Index has risen and is now just below 17. As an indicator of volatility, we need to monitor to see if it continues to rise.

The USA CPI turned out to be better than expected, coming in at 0.6% instead of 0.5%, 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. Having said so, this upside surprise is not of a significant amount, and hence any bullish contribution towards the US dollar is likely minimal.

Any bullish ambition for the euro currency is likely to be easier now as the market has already priced in the covid challenges for the euro area. This clears much of the upside resistance.

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

The US Retail Sales is due later. It is expected to report 5.8%. 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. Let us see if it provides any push to the currency pair.

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
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 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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