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EUR/USD Weekly Forecast 1 March 21

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Hi forex koalas!

It’s March and soon we’ll have only 3/4 of 2021 left. Time flies. But not as fast as your money if you do not use proper money management! I have a story for you today.

EURUSD Weekly Chart

Technical Analysis

In the EUR/USD weekly chart above, we see the currency pair end the week bearish.

The lower bollinger band and 1.2 lie ahead in defiance of any bearish momentum. If these fail, it will open up the previous consolidation range around 1.18.

A bullish recovery will probably attempt to push for 1.22. Considering the failure of this week’s price action to hold above it, a stronger momentum will be required.

Sentiment Analysis

SP 500 Equities Sentiment

Looking at the S&P 500 chart above, we can see the current bearish climate. We often see the EUR/USD move lower together with the S&P 500 due to risk aversion.

It is important to note that we may not be out of the woods yet as the Cboe Volatility Index has risen, indicating increased volatility.

Ok. Remember I said I have a story? If you followed the currency pair closely last week, we saw it climb and breached 1.22. After following forex for a decade, I would like to say I am acquainted with it. Nothing is confirmed until it happens. I cautioned in the EUR/USD update late last week that we had yet to see the currency pair close the day above 1.22. The S&P 500 appeared shaky and if it dropped, the EUR/USD might follow.

And it happened.

A reader wrote in to rant about a margin call. Losing money is definitely sad, and I wish it will not happen to you. But you need to trade forex properly and protect your capital!

The reader was buying in big after 1.22 because he felt that the major resistance had fallen and the strong bullish pressure would pop it up. There was no proper money management, and the trade was excessively risked. His sole long position was closed when the margin ran out.

  1. There is no such thing as strong pressure popping something up or down. The market is not a kettle. It only “pops” if the majority decides so.
  2. The forex chart is only one out of MANY technical inputs you should be considering. SP 500, gold, Cboe Volatility Index, are just a few of the common ones I use.

There is no get rich fast in forex. I had 3 margin calls previously. I know that well.

There were talks by various European Central Bank officials on the need for more action to support the economy. The possibility of more quantitative easing measures will dampen the sentiment towards the euro currency. When accommodative actions are taken, liquidity will be increased. The extra supply will lead to a downside weight on price.

We need to be on the lookout to see if the talk becomes action.

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 ISM Manufacturing PMI
USA ISM Services 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.

EUR ECB President Lagarde Speech
USA Fed Chair Powell Speech
Speeches may reveal new insights into economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.

USA ADP Non-Farm Employment Change
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.
ADP’s statistics are based on the payroll data of approximately 400,000 U.S. business clients. Therefore, it is viewed by many as a possible early indication of the US Non-Farm Payroll result.

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 Average Hourly Earnings
Consumer earnings is important due to it’s upstream impact. With more earnings comes possible 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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