The EUR/USD is currently stalled around 1.2040.
In the EUR/USD daily chart above, we see the currency pair making little progress on either side.
Dojis usually indicate apprehension with no direction taking a dominant stance. This is in line with my expectation from the previous EUR/USD weekly forecast. A lack of major economic releases provides no significant push to sentiment which drives short-term price action.
The upper bollinger band has now moved higher and hence allows further upside push.
Any bearish recovery will need to tackle the strong support region of 1.2.
Looking at the S&P 500 chart above, we see that the equity index is rising again. This shows the absence of any significant risk aversion. Therefore, we can expect a minimal push for the US dollar because of the lack of interest in safer assets.
The Cboe Volatility Index is now 17.5. There appears to be some extra volatility left in the markets. Do pay attention to this, as any increase again suggests possible choppy trading conditions.
The European Central Bank policy event is due later. Many analysts foresee a reiteration of the commitment to accommodative policy. This is done so as to support the Euro area economy that is plagued by the COVID-19 pandemic. As the market has likely priced this in already, I expect no big moves unless the statements are more dovish or bullish than expected. Accomodative developments usually weaken a currency due to the possibility of excess supply.
The latest Retail Sentiment analysis released for members further confirmed the previous indication of the changing EUR/USD climate. If this continues, we will need to seriously consider the change of the EUR/USD direction. Members should log in immediately to view the report as it may affect your forex trading plans. If you are not a member, sign up now and enjoy a 10 days risk-free money-back guarantee.
It is now mid-week so do keep a lookout for the various upcoming economic releases and the reported data. Any unexpected development will spark some unexpected price action.
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.
We have numerous PMI data expected towards the end of the week. These may shed light on the recovery of the economies and give an indication of possible sentiment changes.
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.
EUR Main Refinancing Rate
A high interest usually generates demand while a low interest may result in the selling of the currency for better yielding alternatives. Therefore the interest rate result usually has a significant impact, especially when it is an unexpected result.
EUR Monetary Policy Statement
Monetary policy statements are given much attention by analysts and investors as it has an impact on the economy. The minutes will be analyzed thoroughly for insights on the economic policy ahead. Significant volatility may be generated if there are unexpected revelations.
EUR ECB Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur 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.
EUR French Flash Services PMI
EUR French Flash Manufacturing PMI
EUR German Flash Manufacturing PMI
EUR German Flash Services PMI
EUR Flash Manufacturing PMI
EUR Flash Services PMI
USD Flash Manufacturing PMI
PMI or 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.
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