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EUR/USD Update 18 Jan 21

Welcome to a brand new week of forex trading!

Our attention to the S&P 500 paid off last week as we could see the downslide of risk appetite. The EUR/USD fell because of a strengthened US dollar.

EURUSD Hourly Chart

Technical Analysis

Looking at the EUR/USD hourly chart above, we see the currency pair pushing towards 1.2.

The EUR/USD is now facing support at the lower bollinger band as it seeks to descend. If the support fails, the strong technical and sentiment region of 1.2 will probably be the next support. A return of bullish pressure will probably see resistance at the middle bollinger band.

Sentiment Analysis

The US retail sales came out much worse than expected. Instead of 0%, it came out -0.7%. This brought back apprehension as investors considered the possibility of a rally stretched too far. 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. Poor performance may herald tougher times ahead.

Another area of concern is President-elect Biden’s stimulus package proposal. While it provides relief for many, analysts question the source of funding and fear it may lead to a rise in corporate tax.

These concerns led to an impact on sentiment.

A look across the various financial news media now suggests a dull sentiment for Monday’s US trading. If this happens, we may see further strengthening of the US dollar as investors seek safe-haven assets such as the US dollar, yen, and gold.

The Week Ahead

Today is light on the economic news front, but there are important events towards the end of the week. I highly encourage you to read through and learn about these events. This helps improve your understanding of the market sentiment.

US President-Elect Biden Speech
Speeches may reveal new insights into economic policies or contain a question-and-answer segment that at times goes into unscripted topics resulting in unexpected developments and volatility.

EUR Main Refinancing Rate
A high interest usually generates demand, while a low interest may cause 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 impacts 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.

US 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.

US 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
US Flash Manufacturing PMI
PMI or 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.

 

Be mindful that these are not the only events and they are not in chronological order. You should follow an economic calendar so that you will not be caught unaware. Premium members can log in to view the economic calendar.

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