It is the second day of the week and I welcome you to my EUR/USD update.
In the weekly forecast, I spoke about the falling value of gold and how it may indicate better market sentiment. Riskier assets such as the euro may benefit from this.
Technical Analysis
In the EUR/USD daily chart above, we see the currency pair made a failed attempt at 1.22.
It is important to note that the upper bollinger band is in the vicinity and it may add to the resistance at 1.22. In my decade of forex analysis, I observed that bollinger bands often provide good indications of possible price action.
The EUR/USD has since retreated, and any downside pressure will likely see support at 1.21, where the middle bollinger is.
Sentiment Analysis
Looking at the S&P 500 daily chart above, it is clear that it has been on a retreat since mid-February.
It is crucial to monitor this closely because if it falls further, it may trigger a knee-jerk reaction leading to possible risk aversion.
The German ifo Business Climate came out better than expected. Instead of 90.5, it was reported to be 92.4. Germany is a key economy of the eurozone and this will increase positive sentiment for the currency. It has almost recovered to pre COVID-19 levels, and this indicates a good momentum.
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 less business activities due to prudence.
The USA CB Consumer Confidence is up next. 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.
If the release is not as expected, we may see an impact on the sentiment towards the US dollar. Investors and analysts are particularly keen to see the impact of the pandemic on consumers.
The Week Ahead
There are 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.
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 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 Chicago PMI
A 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.
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