EUR/USD Pulse Check 2 May 19


The EUR/USD is back at the pivot region of 1.12.

1.12 Attracts

Looking at the EUR/USD 60 minutes chart above, we note that the currency pair has dipped hours earlier back towards the strong sentiment region of 1.12.

As mentioned in our previous pulse check, strong region like 1.12 often command a high level of influence on the price action. With the EUR/USD around this region now, it is down to the respective bullish and bearish participants’ momentum to decide the final direction.

Do be mindful of the yellow lines as these are the possible support and resistance regions in the immediate vicinity. As you can see on the chart, significant price action is found in those regions. Price action in shorter time frames are often sentimental in nature.

US Federal Reserve Is Patient

We spoke of the growing speculation that a dovish statement will open up the path to a rate cut. This is obvious in the EUR/USD as the currency pair climbed higher leading to the release.

The statement rained on the rate cut camp’s parade as there was no dovish positioning to be found. On the contrary, the take of the central bank is that growth and employment is satisfactory and hence will remain patient on interest rates. Indeed the ADP Non-Farm Employment Change was better than expected, reporting 275k instead of the forecasted 181k.

With the prospect of an interest rate cut gone for now, traders renewed demand for the US dollar, strengthening it and bringing the EUR/USD back to 1.12.

Still to Come

Many important economic events are still to come, including:

EUR CPI Flash Estimate
EUR Core CPI Flash Estimate
CPI or 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.

USA Average Hourly Earnings
Employment cost is a leading indicator of inflation. If cost rises, the increase is reflected downstream in the price of production and products. If inflation is high, a central bank may increase interest rate to mitigate the situation.

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 NFP often produces significant price volatility due to the importance of it.

USA ISM Non-Manufacturing PMI
Surveys of purchasing managers are 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 less business activities due to prudence.

USA Various Federal Reserve Officials Speeches
A number of Federal Reserve Officials are scheduled to speak towards the end of  the week.  As there may be press conferences which may go into unscripted territory during the Question and Answer segment, any unexpected developments may result in volatility.

There are many more events and hence it is important to follow an economic calendar. By doing so, you can reduce the possibility of an unexpected development affecting your trading plan. Members can log in to their dashboards for an economic calendar.

Traders should always practice proper money management and seek to understand the underlying tones for the market.

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