EUR/USD Weekly Forecast 6 May 19


In the previous EUR/USD weekly forecast, we noted that the week was bearish and the strong sentiment and support of 1.12 was breached. 1.12 being a strong sentiment and technical region might act as a pivot, bringing the price action back to it’s vicinity.

We learned that the Euro Zone released a number of disappointing data. The German Ifo Business Climate came in worse than expected and the Spanish unemployment rate had worsen compared to the previous month. Across the Atlantic, the US Core Durable Goods Orders, US Durable Goods Orders and US Advance GDP came in better than expected.

EUR/USD Technical Analysis

Looking at the EUR/USD weekly chart above, we observe a bullish week for the currency pair. As expected, the 1.12 region did spread it’s influence, drawing the price action back to it’s vicinity.

With reference to the yellow line plotted above, the bearish momentum is still valid. In the upcoming week, it is important to monitor the price action closely. The current position of the EUR/USD at 1.12 poses a challenge as the direction can be either. We will need to drop to the shorter time frames to ascertain momentum.

For the week ahead, the middle bollinger band and 1.14 will be possible resistances. Should the bearish momentum continue, it is likely to encounter an immediate support at the lower bollinger band. The yellow plotted line may serve as an extended support.

Euro Zone Reports Positive Data

Early in the week, the Spanish Flash GDP, German Prelim CPI and Euro Zone Prelim Flash GDP was reported to be better than expected. As the gross domestic product data is a measure of the monetary market value of all the goods and services produced, a better than expected figure would add to the positive sentiment. This is the same with the CPI or Consumer Price Index as consumer goods is a significant component of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.

A significant upside surprise would be the German CPI. The increase of 1% compared to 0.5% is twice the expected result. Germany is the Euro Zone’s biggest economy and hence this release will likely be a significant boost for the sentiment towards the euro currency.

USA Has It’s Own Too

Not to be outdone, the US reported a better than expected CB Consumer Confidence. It was 129.2 instead of 126.2. Consumer surveys are influential as the sentiment of consumers is a leading indicator of economic health. Consumers feeling upbeat about the economy will likely increase their purchasing activities, leading to increased retail sales.

Despite the general expectation of the market, the US Federal Reserve did not appear to be dovish in the FOMC Statement and Press Conference. There was no wording of a possible rate cut. The market usually rewards higher interest rates and hence this likely gave a boost to the US dollar.

The US Non-Farm Payroll was reported to be 263k instead of 181k. This is more than 40% higher than the forecast. The unemployment rate fell to 3.6% instead of the expectation of a flat 3.8%. The sentiment was likely to be highly positive as we observe risk appetite increasing across the market in the form of assets shifting away from the US dollar to higher yielding forms. This is particularly very visible in our premium analysis for the US Non-Farm Payroll where we track the monthly performance of the currency pairs on release day.

The Week Ahead

We may move into the new week riding on the waves of risk appetite. As developments occur next week, we can use the events as cue of an increased or decrease risk appetite. Topside momentum will come from increased risk appetite as traders position themselves in riskier assets. On the other hand, risk aversion may see a return of value to the US dollar as it is usually viewed as a “safe” asset.

USA FOMC Member Williams Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
EUR EU Economic Forecasts
Economic forecasts are important and monitored by traders and analysts. The idea is to obtain insights to possible future economic polices and conditions. Volatility may increase, especially when the actual data is not as per expectations.
USA FOMC Member Quarles Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
EUR ECB Monetary Policy Meeting Accounts
Interest rate related statements are given much attention by analysts and investors as it has a direct impact on the currency. Investors usually favor a currency with a higher interest rate and will analyse these statements thoroughly for insights on the interest rate policy.
USA FOMC Member Brainard Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
USA Federal Reserve Chair Powell Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.
USA PPI
USA Core PPI
PPI or 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.
USA CPI
USA Core CPI
CPI or Consumer Price Index is important because the price of consumer goods is a significant component of inflation. If inflation is high, a central bank may increase interest rate to mitigate the situation.
USA FOMC Member Brainard Speech
Speeches may go into unscripted territory during the Question and Answer segment (if any) and hence may spur unexpected developments and volatility.

There are many more events and hence it is important to follow an economic calendar. By doing so, you can reduce the possibility of an unexpected development affecting your trading plan. Members can log in to their dashboards for an economic calendar. The latest premium analysis and our popular Price Action Bias Signals are now available too.

Traders should always practice proper money management and seek to understand the underlying tones for the market.

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