Good day forex trading koalas!
Welcome to our weekly review of the popular EUR/USD. Did you harvest lots of green pips for the week? I sure hope you did!
In the previous EUR/USD forecast we noted that the currency pair fell back to the pivot region of 1.16 as expected. The path ahead remained elusive and a drop to shorter time frames for monitoring was recommended. The US Non-Farm Payroll data due would likely shed light on the market sentiments.
Looking at the EUR/USD weekly chart above we noted that the currency pair was bearish for the week and the lower bollinger band functioned as a support. Long time readers will know by now that the bollinger bands play a significant role in our analysis and had often brought us trading success.
If the bearish pressure continues to exert influence in the upcoming week, we expect a test on the lower bollinger band followed by 1.14. A bullish recovery will need to take out 1.16 / middle bollinger band before rolling on to greater heights.
An interesting observation that I would like to point out is the tightening of the bollinger bands. As conditions get more constricted, it is more likely that a significant shift happens in the form of a breakout.
While the US Non-Farm Payroll was weaker than expected, the unemployment rate has fallen to a decades old record low. Having said so, average hourly wages grew slightly as expected at 0.3%. This is not optimal as the current economic growth probably sets expectation at a higher rate of wages growth. Many investors are of the belief that the continued positive data from the US economy may trigger an accelerated interest rate hike timeline. This is likely to give us two significant takeaways.
1) the US dollar getting more demand versus the euro currency due to the interest rate difference
2) risk aversion among business investors as low cost loans dry up
It was reported that global manufacturing is picking up at a rate that is the weakest in almost two years. The US and China trade war remains a challenge and burden to the global economy. Investors and traders do not take sovereign situations lightly and hence risk aversion may surface.
While there is no significant data expected from the euro zone in the upcoming week, we need to be reminded that it’s recovery is still an ongoing journey compared to the US phase of growth. The US producer price index and consumer price index due to be released this new week may provide insights as to the momentum of the economy.
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