In the previous EUR/USD forecast, we observed the ability of the major sentiment and technical region of 1.16 to withstand the bearish pressure. With a similar region at 1.18 functioning as a resistance, we may see consolidation for the currency pair.
Looking at the EUR/USD weekly chart above, we see a bearish week for the currency pair. While the currency pair did breach the major resistance of 1.18, it was only temporary. You can see in the area circled that the EUR/USD often experience a significant challenge at that region. This is useful for our forex trading plans as we factor the possibility of a reversal or breakout.
The EUR/USD is now at 1.1716. This is the closing region two weeks ago and a revisit this soon suggests consolidation. In the week ahead, the major sentiment and technical regions of 1.18 and 1.16 will likely function as a major resistance or support respectively. The middle bollinger band is currently at 1.16 and it may provide additional support against any bearish push.
The week saw a number of better than expected economic data from the US. The US PPI came in 0.4% instead of 0.2%. Producer Price Index is important because the price of goods sold by producers influences the downstream impact of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation. Speculations of a possible interest rate hike may also generate demand for the currency.
Late in the week, the US Retail Sales brought about a major upside surprise. Instead of 0.7%, it was reported to be 1.9%, which translate to over 170% additional performance. Retail Sales is a fundamental component of the economy. As consumers spend, it translates to revenue and flows upstream as salaries, wholesales purchase, production orders and so on. These positive figures likely added to the positive sentiment towards the US economy and contributed to the resilience of the S&P 500 for the week.
In the latest forex premium analysis for our members, we observe various indications among the Major Currency Pairs and Assets Analysis that the price action for the week suggests a reduction of risk aversion. This is also seen in the Correlation Analysis as one of the asset diverged to reflect the situation. Premium members should log in immediately to review it for their forex planning.
The Upcoming Week
In the upcoming week, we are expecting much important economic data from both the Euro Zone and the US. The Euro Zone in particular will see France, Germany and the Euro Zone as a whole report various PMIs. The 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 less business activities due to prudence. Any surprise on either side of the scale has the potential to trigger volatility.
The Bottom Line
It is imperative that we continue to monitor the global and region developments of the various ongoing challenges. The COVID-19 situation is escalating in a number of countries and talks are made about third waves of infections. The US Presidential Election is approaching and sentiments may intensify. These fluid situations have the potential to send the EUR/USD either way.
It is important to follow an economic calendar as your forex trading plans may be impacted due to shifting sentiments. Members do log in to your dashboards for the economic calendar. You should also review the latest Major Currency Pairs, USD Index, Gold, Brent Oil Analysis and Correlation Analysis to complement your forex trading plan.
If you like our signature knowledge based approach to forex trading, consider becoming a premium member. At less than $0.20 cents a day, our methodology goes beyond just having you copy trades and signals. We will guide and provide you with the tools required for you to analyse the market and trade in forex. Our signature knowledge based approach will help you understand the markets better, developing a skill of your own. Invest in yourself. Click on members now.