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EUR/USD Forecast Update: Euro struggles under 1.21

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

The week has brought us mixed price action for now. Let us explore the possibilities.

EURUSD Daily Chart

Technical Analysis

In the EUR/USD daily chart above, we see the currency pair struggle to test the region of 1.21.

Based on the previous weeks, we should see a bullish climb any time now. If this does not happen, conditions may have changed.

A bullish continuation will need to breach 1.21 followed by the upper bollinger band. The extended bullish target is 1.22.

If a bearish recovery returns, I see possible support at the strong support and resistance region of 1.2, followed by the middle bollinger band.

Sentiment Analysis

SP 500 Daily Chart

Looking at the S&P 500 chart above, we can see that equities are somewhat flat. Having said so, nothing indicates the end of risk-seeking appetite. We should continue to see minimal upside contribution to the USD from traders seeking safer assets.

The Cboe Volatility Index is back above 17. As an indicator of volatility, this suggests that some volatility remains. We are more wary of big changes in the index, but slight changes as such can provide good peripheral information.

The German ifo Business Climate reported lower than expected results. Instead of 97.8, it was 96.8. Business climate surveys are influential as the sentiment of businesses 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 due to prudence. With Germany being a key economy of the euro area, this disappointment likely affected euro sentiment. Investors are worried about the possibility of worsening pandemic impact.

Across the Atlantic, the USA CB Consumer Confidence reported better than expected results. It was 121.7 instead of 113.1. 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.

Our Retail Sentiment analysis for members continues to provide valuable insights into the current market conditions. The latest report was flat, which reflects the current apprehension. *If you are a member, log in immediately to review the latest Retail Sentiment analysis. If you are not, make use of our 10 days risk-free money-back guarantee. Membership is as low as $0.20 per day.* We need to continue to pay close attention to the changes in the retail sentiment to maximize our awareness and opportunities.

ECB’s President Lagarde is due to speak later. As it 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, do be mindful of the event and practice proper money management.

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 Federal Reserve is due to release its policy statement and interest rate decision. Pay close attention as any dovish stance taken by the officials may significantly dampen the sentiment for the USD. The implied positioning of the central bank towards monetary policies may cause traders to take preemptive positions. The possibility of an increase in the interest rate or tightening policy may cause increased demand, while the possibility of a decrease or accommodative policy may cause the currency to be sold.

 

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 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 FOMC Statement
Monetary policy statements are given much attention by analysts and investors as it has an impact on the economy. The minutes will be analysed thoroughly for insights on the economic policy ahead. Significant volatility may be generated if there are unexpected revelations.

USA Federal Funds Rate
A high interest usually generates demand while a low interest may result in the dumping of the currency for better yielding alternatives. Therefore the interest rate result usually has a significant impact, especially when it is an unexpected result.

USA FOMC Press Conference
Press conferences may go into unscripted territory during the Question and Answer segment and hence may spur unexpected developments and volatility.

USA Advance GDP Price Index
The GDP Price Index is important because it is a measurement 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 Advance GDP
EUR German Prelim GDP
Gross domestic product is a measure of the monetary market value of all the goods and services produced. It is an overall measure of economic activity and health and thus wields influence on the home currency.

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 Pending Home Sales
The purchase of a house results in economic activities. Renovation jobs will be created for construction workers, the various sub contractors, and services associated with new ownership such as power, water, furniture, and so on.

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