Weekly Forex Analysis
(November 18 - November 22, 2019)
Hey! This is Philip with our new weekly outlook of the Forex market.
Below I present a preview of the article. To read the full analysis click the button below.
US Dollar Fundamental Outlook – USD Neutral In Quiet Trading
The Dollar traded without much direction last week, staying within established ranges versus most of the major currencies. Largely in line with expectations, Fed Chairman Powell sounded neutral in his testimony and reaffirmed that interest rates will remain unchanged for a while. CPI inflation and retail sales were mixed and didn’t provide much support for the greenback.
We have another quiet week ahead of us. The FOMC minutes will be the most important USD related event on the calendar, while housing data, the Philly Fed Manufacturing Index and Markit’s Manufacturing PMI will be released also.
In a relatively quiet week, events and flows in other currencies, particularly Euro and risk-sensitive currencies, will direct USD performance to a large extent. Overall, sentiment toward the USD generally remains neutral but still more likely to lean on the bullish side than the opposite.
An announcement from Trump on Chinese tariffs is also expected in the near future. If that happens this week, it will stir volatility across the Fx pairs, though the direct USD reaction could be mixed.
Euro Fundamental Outlook – Germany Avoids Recession; Manufacturing & Services PMIs Up On Friday
German data surprised positively last week and the Euro was able to recover some of the losses as a result. Most importantly, it was reported that Germany avoided a technical recession, though by a very narrow margin. The economy is still expected to remain weak the sources reported, which is why the Euro reaction was muted and only modest.
Nonetheless, the small positive surprises helped to alleviate some pessimism, and if this week’s data is also positive, the Euro currency may be able to extend a bit higher. The critical PMI reports (flash release) for the services and manufacturing sectors will be published on Friday and will be the key event that Euro traders will be watching. Expectations are already very low, and a small positive surprise can help the Euro to recover further. On the other hand, however, if the actual reports
are even worse than the forecasts, then the Euro will probably sell-off and extend the broad bearish trend.
The ECB Monetary Policy Meeting Accounts from the central bank’s last meeting will be published on Thursday. Additionally, ECB President Lagarde will also speak on Friday. Given the schedule of events on the calendar, it’s probable that trading will be quiet in the early part of the week and most of the volatility will be reserved for the end of the week and those impactful events.
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EURUSD Technical Outlook:
The 1.10 area was going to be support, as we noted in our analysis last week. Indeed, EURUSD bounced in this area, and the pair now seems to be nearing the 1.11 level.
However, resistance is likely to be waiting there, and a stronger one toward the prior highs and at 1.1200 too. The daily chart shows us that there are no clear patterns here at the moment, and some irregular/sideways price action is possible.
The weekly chart, however, shows us that EURUSD is trading inside of a gradual bearish channel which resistance stands in the 1.1200 – 1.1250 area. Thus, this area is a very important resistance for EURUSD now.
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