Good day forex traders.
How was your trading this week? With the volatility experienced by the EUR/USD, I hope all is well.
In the previous EUR/USD forecast we noted that nothing suggested an end of the long term bearish momentum. However should the 1.14 resistance fail, we might see the opening of the upper region of up to 1.22. In the meanwhile 1.18 would be the medium term bullish target. The upper bollinger might also function as an immediate resistance. Bearish return might see 1.12 followed by 1.11.
Looking at the EUR/USD weekly chart above we note that the currency pair had a wide range for the week. It spiked and nearly reached the 1.18 medium term bullish target as mentioned. It has since retreated and is testing the bearish resistance of 1.12 as expected.
We are currently in a consolidation phase and hence it is not possible to determine the short to medium trend for now. It is crucial to remain prudent and have proper money management. Topside resistances are 1.18 and 1.22. Supports are likely to be at 1.12 , 1.11 and 1.10.
This week saw the correction in the Chinese market which also affected equities world wide. The euro currency gained in value and a few readers asked if this means that the euro may be turning into a safe haven asset where people buy into during risk aversion. This is unlikely as there is no consistent data to suggest this correlation. The temporary spike in the euro may be the unwinding of equities position as investors gave a knee jerk reaction to the dip. When euro based investors sell their U.S. equities, the U.S. Dollar gets exchanged back into the euro currency. This creates demand for the euro currency and supply for the U.S. Dollar.
There are speculations that the European Central Bank may further increase their monetary easing. If indeed so, this is likely to create a dampening pressure for the euro currency as supplies increase.
Next week brings us the US Non-Farm Payroll and it remains critical to monitor the developments as many investors use it as a gauge of economic health.
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