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EUR/USD Weekly Forecast: Bullish Push Failed on Mixed US Economic Data

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Latest Premium Analysis Update: Retail Sentiments Analysis 23 Nov 21 View Anlaysis

The week ended slightly bearish. Let us look into the current situation.

EURUSD Weekly Chart

Technical Analysis

In the EUR/USD weekly chart above, we see a failure to breach above 1.22. The currency pair’s bearish ambition was blocked by the middle bollinger band too.

The week was a classic play on our technical levels and hence congratulations to our readers who saw the opportunities. In our decade of forex trading, the bollinger bands have played an important role time and time again.

The week ahead will see the strong technical and sentiment region of 1.22 stand in opposition to any bullish ambition again. The extended bullish target would be the upper bollinger band and 1.23 region. A return of a bearish climate will probably see 1.21 serve as an immediate resistance, followed by the middle bollinger band and 1.2.

The technical climate is rather similar to the previous week.

Sentiment Analysis

SP 500 Daily Chart

Looking at the S&P 500 chart above, we see that equities have fallen. Nothing indicates the end of risk-seeking appetite as the value is still near the top. Hence we will probably see minimal upside contribution to the USD from traders seeking safer assets.

The Cboe Volatility Index is now above 18. As an indicator of volatility, this suggests that volatility has increased. We are warier of big changes in the index, but slight changes as such can provide good peripheral information.

The USA CPI performed better than expected, adding to the chain of good releases. It reported 0.8% instead of 0.2%. We need to be mindful that the 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. Speculations of a possible interest rate hike may generate demand for the currency.

This likely added to the US dollar strength we saw midweek.

But in an unexpected surprise, the US Retail Sales came out worse than expected. Clocking in at 0% instead of 1%, this ignited fears that the stimulus uplift is waning. Retail sales is a fundamental component of the economy. As consumers spend, it translates to revenue and flows upstream as salaries, wholesales purchase, production orders, and so on.

As a result, this probably contributed to the easing of the EUR/USD towards the upside and the dip in equities.

The upcoming Retail Sentiment analysis for members which will be due for release on late Monday / early Tuesday will be of much interest to me. It is so far aligned with the current price action and I look forward to a new update. In forex trading, understanding the entirety of the market, such as sentiment, is crucial.

The Week Ahead

There are a number of important economic events this week. I highly encourage you to read through and learn about these events. This helps improve your understanding of the market sentiment.

Find below a number of the economic events (not in chronological order).

 

EUR ECB President Lagarde Speech
Speeches may reveal new insights into economic policies or contain a question and answer segment that at times go into unscripted topics resulting in unexpected developments and volatility.

EUR ECB Financial Stability Review
This is an analytical report on the current situation of the financial system. It seeks to identify possible stability risks. This report is closely watched by analysts and traders  who are attempting to gain insights on possible future policy actions.

USA Crude Oil Inventories
This gives insight into the supply and demand of oil, which may tell us more about the economy’s health. An expanding economy typically uses more oil, while a contracting one may result in significant excess.

USA FOMC Meeting Minutes
Monetary policy meeting minutes are given much attention by analysts and investors as it has an impact on the economy. The minutes will be analyzed thoroughly for insights on the economic policy ahead. Significant volatility may be generated if there are unexpected revelations.

USA Philly Fed Manufacturing Index
This survey of manufacturers is important as the sentiment of businesses is a leading indicator of economic health. A healthy sentiment suggests that an economy is moving along well and with the activities of the businesses, downstream benefits will happen such as employment and investment.

USA Unemployment Claims
Employment is a fundamental component of the economy as it leads to consumer spending and hence retail sales. A low unemployment rate is an indicator of a healthy functioning economy, while a high unemployment rate suggests a challenging economic climate.

EUR French Flash Manufacturing PMI
EUR French Flash Services PMI
EUR German Flash Manufacturing PMI
EUR German Flash Services PMI
EUR Flash Manufacturing PMI
EUR Flash Services PMI
USA Flash Manufacturing PMI
A 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 because of prudence.

 

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