The EUR/USD is now above 1.22.
This is a significant development and we should account for it in our forex trading plans. Nonetheless, there are always two sides to a coin and I will be sharing more on that.
With reference to the weekly EUR/USD chart above, we note that the currency pair is now above 1.22 and beyond the upper bollinger band. Being on the outside of the bollinger bands often indicates a strong momentum that may see consolidation on the horizon. If this indeed happens, we may see it pivot around 1.22. As the price action has only just breached 1.22, we need to also be on the lookout to see if the EUR/USD manages to hold on to 1.22.
A bearish recovery in the upcoming week will likely see 1.2 as the target and strong support. Continuation of the downside push will possibly see the middle bollinger band provide some support.
I mentioned there are two sides to a coin and one aspect we need to be mindful of is that with the holidays just around the corner, forex volume may be low. Price action may be irregular and volatility may increase. You can read more about a low forex volume condition here.
I attached a portion of the Correlation Analysis Report for premium members above. Readers and members who have been following us regularly would be enjoying much success in the current trend. A number of weeks back, I highlighted that indications from our various market observations suggested that risk appetite had increased. The analysis above clearly shows the correlation between the bullish S&P500 and EUR/USD.
If you are new to us, do be aware that our approach to forex trading is an intimate understanding of the market sentiment and dynamics. A chart alone is insufficient to provide enough information and context for an effective forex plan. During times of increased risk appetite, investors often seek out riskier assets. The US dollar often weakens as demand for other currencies increase. We can see this in the analysis above. As the equity market rallied, the EUR/USD climbs too as a result of weakened US dollar strength.
The current situation is one of increased positivity. With COVID-19 vaccination underway and vaccine production capabilities being stronger than ever, investors are feeling upbeat. Many analysts predict a continuation of bullish conditions as long as the situation remains stable. A word of caution though, COVID-19 is still spreading and deaths are high. Vaccination will take many months or even years before we can see a significant improvement in the pandemic figures. We need to remain vigilant of any market surprises and without doubt, proper money management is a must.
The Week Ahead
As mentioned earlier, the holiday session is upon us and economic events are light in numbers. In the week ahead, we expect the US Final GDP to be released. 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. Investors and analysts will be monitoring closely in view of the ongoing pandemic to ascertain economic impact.
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