EUR/USD Pulse Check 7 May 19


The EUR/USD remains around the pivot region of 1.12.

EUR/USD Tight Ranged

Looking at the EUR/USD 60 minutes chart above, we note that the currency pair has dipped below 1.12 after a short incursion above.

In our weekly review, we mentioned that this week may be riding on the risk appetite of the market. Price action will hence be likely influenced by the amount of risk appetite or risk aversion in the market. If you are to observe the chart carefully, you will get a great example of it!

The new trading week started with a forex gap to the downside. Brokers may be closed on weekends but the market expectation continues. President Trump announced that he will be increasing existing import tariffs of 10% on $200 billion of Chinese goods sold in the US to 25% on Friday. He also mentioned that in the future, 25% tariffs could be imposed on a further $325 billion of goods. He is of the opinion that the trade talks are going too slowly. Traders are averse to the possibility of geo political challenges and hence risk aversion increased. Assets usually deemed as “safe” such as the US dollar will rise in value due to demand and by the time the brokers resume service, the expectation for the EUR/USD exchange range had already fallen. To find out more about forex gaps, head over to our article at the forex training section.

The range of the price action is rather limited. This suggests apprehension. Be on the look out for a possible technical squeeze, especially if an economic event turns out unexpected.

The yellow lines plotted in the chart 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.

Euro Area Economic Forecast Bleak

The European Commission has cut its growth forecast for the euro area. In particularly Germany’s economic growth forecast was cut from 1.1% to just 0.5%. This is more than a 50% cut. Germany is the Euro Area’s largest economy and hence the impact will be significant. Going further, the commission cautioned that increasing trade tensions may make the outlook even worse. We expect some risk aversion to be injected due to this development.

Still to Come

Many important economic events are still to come and it will be even more critical now for us to assess each with the understanding of whether risk appetite has increased or decreased.

USA FOMC Member Quarles Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
EUR ECB Monetary Policy Meeting Accounts
Interest rate related statements are given much attention by analysts and investors as it has a direct impact on the currency. Investors usually favor a currency with a higher interest rate and will analyse these statements thoroughly for insights on the interest rate policy.
USA FOMC Member Brainard Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
USA Federal Reserve Chair Powell Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
USA PPI
USA Core PPI
PPI or Producer Price Index is important because the price of goods sold by producers influences the downstream impact of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.
USA CPI
USA Core CPI
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 FOMC Member Brainard Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and 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. The latest premium analysis and our popular Price Action Bias Signals are now available too.

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

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