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EUR/USD Update 21 Jan 21

It is time for another EUR/USD update.

In our previous update, the sentiment was a little shaky, and we had to monitor the currency pair for any impact.

Technical Analysis

Looking at the EUR/USD hourly chart above, we see the currency pair back at a previous consolidation range.

The attempt to breach the upper bollinger band had failed, and it is now slipping towards the middle bollinger band. We may see range-bound trading between 1.2 and 1.22 if no significant developments happen.

Sentiment Analysis

The S&P 500 had risen over the past few days. The concerns about President Biden’s stimulus package proposal have receded for now. The inauguration brings a new beginning for the US, and optimism is high. This is further pushed by better than expected quarterly earnings, which saw Netflix climbed 16.9% after beating estimates of new subscriptions.

A quick observation shows that the EUR/USD did not rally as much as expected. I believe this is because of the increase in demand for the US dollar. Recent political developments have increased positive sentiment towards the country and its currency.

A look across the various financial news media now suggests the possibility of further highs in today’s US trading. If the positive sentiment towards the US dollar does not result in bullish pressure, we may see a weakening of the US dollar as investors seek riskier assets.

The Week Ahead

The EUR Main Refinancing Rate is due to be released in an hour’s time. Analysts do not expect any surprise as to the interest rate, but the monetary policy statement may provide unexpected insights into policies that may affect the EUR/USD.

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 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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