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EUR/USD Weekly Forecast 26 Oct 20

In the previous EUR/USD forecast, we saw a bearish week for the currency pair. The currency pair ended the week in the same region as two weeks ago and this suggested consolidation. The middle bollinger band was at 1.16 and it might provide additional support against any bearish push.

EURUSD weekly forecast forex

Technical Analysis

Looking at the EUR/USD weekly chart above, we observe a bullish week for the currency pair. The currency pair breached the major resistance of 1.18 and fell short of the 1.19 resistance. It is vital to monitor the price action closely at this point in time. If the EUR/USD continues to stay above 1.18, more bullish interest may enter the market and add upside pressure. On the other hand, if the momentum fizzles and causes the currency pair to dip below 1.18, a reevaluation of the sentiment is needed.

In the week ahead, the major sentiment and technical regions of 1.2 and 1.18 will likely function as a major resistance or support respectively. Extended targets are likely to be 1.21 and 1.17.

Fundamental Analysis

The week saw a better than expected German Flash Manufacturing PMI. It was reported to be 58 instead of 55. 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 fewer business activities due to prudence.

With this particular release, we have seen three consecutive months of increasing German Flash Manufacturing PMI. This is very much welcomed by the market as prior to July 2020, the report was below 50 for more than a year. A figure below 50 indicates a shrinking industry. This upside surprise likely added risk-seeking sentiment into the market. This correlates to our latest Major Currency Pairs and Assets Analysis. In the previous week, we mentioned that both our Major Currency Pairs and Assets Analysis and Correlation Analysis indicated a reduction of risk aversion. The price action across the various assets this week lends additional weight to the analysis and we are pleased to have provided our Premium members a great complement to their forex planning. Premium members should log in immediately to review the latest updates 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 US will report its Advance GDP and it is estimated to show a positive bounce back. 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. If the figure unexpectedly disappointments, risk aversion will likely increase. The European Central Bank is also expected to hold its interest rate event. In view of the challenging COVID-19 situation, investors and analysts are watching closely to see if the central bank will make any policy actions in response. While a further increase in the support provided is a positive development, the Euro currency may face increased downside pressure due to concerns about oversupply.

The Bottom Line

Continue to monitor the global and regional 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.

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