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EUR/USD Weekly Forecast 11 Mar 19

The week was a busy one with much economic data released. In the previous EUR/USD review, we noted that the currency pair attempted to breach the resistance of 1.14 but failed. Our proprietary Price Action Bias Signals indicated a slight bearish bias. The strong support of 1.12 would likely offer up much buying demand. China continued to report mixed economic figures, adding on to the theme of slowdown.

Looking at the EUR/USD weekly chart above, we note that the week was a bearish one. It is good that the Price Action Bias Signals was spot on! Having said so, we must never take a 100% approach to signals as forex can never be 100% predictable. It is important to understand the market and formulate feasible trading plans!

The strong support of 1.12 was tested and the surge of buying pressure held the fort, pushing the currency pair back up. In the week ahead, it is critical to drop down to shorter time frames to observe the price action. It will likely come down to a battle of sentiments. In our decade of observations, we often see sentiment dictate short term price action. It is also important to be mindful that the lower bollinger band is in the vicinity and will likely add to the strength of the support.

China Headwinds

A survey of purchasing managers in China was reported to be weaker than expected. As an indication of economic health, negative sentiments were likely generated. Investors generally expect China to maintain a high level of growth. The much weaker than expected Chinese trade balance probably added to the negative sentiments. It was reported to be 34B instead of the expected 257B and it is indeed a big difference. The strengthening of the US dollar might have been risk aversion.

European Central Bank and Quantitative Easing

The ECB cut the forecast for this year by the most, estimating an economic expansion of 1.1% instead of the previous 1.7% mentioned in December. A new round of monetary stimulus such as loans for banks was announced. Interest rates would be kept low for a longer period too. As mentioned often, a low interest rate usually results in less incentive for investors of the currency and hence sell offs will likely increase, adding downside pressure.

US Non-Farm Payroll Disappoints

Coming in at 20k instead of 180k, there are some talks of a fear for negative territory. Employment is a key component of the economy and hence reaction to developments are often strong. It is plausible that risk aversion lead to the increased value of the usual “safe” assets, US dollar being one of them.

Week Ahead

It is going to be an economic data heavy week ahead. US Retail Sales, Consumer Price Index and Producer Price Index are due to be released and the US Federal Reserve chair is also expected to speak on a few occasions. Over across the Atlantic, we are also expecting various euro zone industrial production figures and consumer price indexes. There is much more economic data to be released and hence it is good to follow the developments with an economic calendar. Members can log in now to their dashboards for the economic calendar and the latest Price Action Bias Signals.

Proper money management is definitely an important component for any trading plan.

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