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EUR/USD Update Forecast: Lower bollinger band held as expected

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As mentioned in our previous update, the space before the lower bollinger band filled up. Congratulations to our readers who made the right decision! It then acted as a support and brought about some bullish recovery.

EURUSD Daily Chart

Technical Analysis

In the EUR/USD daily chart above, we can see the currency pair rising after a failed attempt at 1.17 and the lower bollinger band.

In our decade of forex analysis, bollinger bands often provide indications of possible support and resistance. It is part of our core analysis consideration.

The lower bollinger band remains as a possible support, together with 1.17.

Any bullish recovery will need to overcome the strong technical and sentiment region of 1.18.

Sentiment Analysis

SP500 Daily Chart

Looking at the S&P 500 chart above, we can see that the S&P 500 has risen.

The Cboe Volatility Index had decreased to 18, a sign that volatility had receded.

Market sentiment remains healthy.

The USA Pending Home Sales turned out to be much worse than expected. Instead of a modest -3.1%, it turned out to be -10.6% instead. This likely increased negative sentiment towards the US dollar as home sales is crucial to the economy. The purchase of a house results in economic activities. Renovation jobs will be created for construction workers, the various sub contractors, and services associated with new ownership such as power, water, furniture, and so on. Hence a poor outlook may result in possible economic challenges.

The USA ADP Non-Farm Employment Change also reported weaker numbers, coming in at 517k instead of 552k. Having said so, this is a positive figure, so it sets an expectation for the upcoming US Non-Farm Payroll that is expected to report 652k. Any significant deviation is likely to increase the volatility in the market.

We have the USA ISM Manufacturing PMI coming in in a few hours. We need to monitor this closely to ascertain if the current bullish recovery continues. In view of the recent euro weakness, if the US reports better than expected economic data, it may weigh down on the already battered Euro Zone.

The Week Ahead

There are many 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 ISM Manufacturing 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.

USA Average Hourly Earnings
Consumer earnings is important because of its upstream impact. With more earnings comes possibly increased consumer spending. This translates to revenues, leading to employment and business expansion.

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 Non-Farm Payroll is basically data released by the U.S. Bureau of Labor Statistics on a monthly basis that represents the total number of employed US workers, excluding the following employees:

– general government employees
– private household employees
– employees of nonprofit organizations which provide assistance to individuals
– farm employees

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