Good day forex traders.
Welcome to our weekly review of the EUR/USD.
How was your forex trading? Hope it was a bountiful harvest of pips!
In the previous EUR/USD forecast we noted that while the currency pair turned bearish for the week, 1.14 remained a highly influential region which might result in pivoting price action. Caution should be taken as short term sentiments might trigger volatility.
Looking at the EUR/USD weekly chart above we note that the currency pair remained bearish for the week. It attempted to test the 1.14 region but came crashing down after failing to gain any foothold. If bearish pressure remains, we are likely to see an attempt to test the support level of 1.12. The EUR/USD is still below the middle bollinger band and hence bearish undertones are likely to be present. As mentioned in our previously weekly review, the bearish undertones should be taken account of as part of your forex trading plan.
A bullish recovery will need to overcome the resistance of 1.14 and move on to clash with the middle bollinger band.
Euro Area is still an area of differences
I often mentioned about the complex nature of the euro area and how it may affect the prospects of the euro currency. This remains as one of the important factors that may impact the EUR/USD. The euro currency’s outlook is weighted down by differences over the common rules of banks in the union. Performing economies such as Germany are hesitant to share the risks of challenged economies such as Italy’s until efforts are made to improve the current situation.
Another matter on hand is the question of debt restructuring. While the euro bailout fund remains available, there is demand for wider automatic actions when issues pop up. A number of countries such as Spain, Portugal and Italy are opposed to this and instead prefer space for a case by case basis of approach.
The euro zone budget is also facing challenges as it gets trimmed down on size and the area of spendings are not agreed upon.
These and other factors such as diverse economic characteristics among the member countries inevitably complicates the economic growth journey for the euro zone and it’s currency.
US – China trade war paused
The latest from the dinner meeting of President Trump and Xi brings news of a halt in new trade tariffs. While this has been hinted in the days leading up to the dinner (hence mostly priced in), it is important to exercise prudence and monitor the currency markets for abnormalities.
US – Russia relations. An upcoming concern?
The naval crisis between Ukraine and Russia threatens to spiral out of control. The US has made it’s disagreement known and President Trump cancelled a meeting with President Putin. This will be an area to watch as financial markets generally frown upon sovereign issues.
Sentiments influences short term price action
This week was an example of how sentiments may affect short term currency momentum. The US dollar suffered a bearish blow due to the dovish comment made by US Fed chair Powell which lead to speculations of a possibility of a reduction or halt in the pace of interest rate hikes. Having said so by end week, the US dollar has recovered in most of the currency pairs we cover as sentiments sink away to be replaced by fundamental currents. Members can log in to their dashboards for the latest Major Pairs and US Dollar Index US Centric analysis to see which currency still held on it’s own against the US dollar.
In the upcoming week, the US Federal Reserve chair Powell is scheduled to speak on at least 2 occasions. The US Non-Farm Payroll is due towards the end of the week. OPEC meetings are also scheduled for the week. Oil prices and developments may trigger sentiments.
Across the Atlantic, European Central Bank President Mario Draghi is expected to speak at an ECB conference. Any unexpected developments may trigger volatility. Proper money management is crucial.