Free Profitable Forex Newsletter
Hey! This is Philip with this week's market update of the Free Profitable Forex Newsletter!
Euro Extends the Rally as ECB Provides Another Reason for Optimism
The euro currency may be entering a new bullish phase on the back of stronger cohesion within the EU. Only a month ago, there were many questions and doubts about the EU's capacity to come together and come up with a unified response to the COVID-19 pandemic. But, after the Franco-German proposal for an EU recovery fund, many of those questions are getting sanguine answers.
The optimism extended this week after the ECB decided to expand support for the region's markets by adding €500 bn more to its asset purchase program (dubbed PEPP this time). Investors are optimistic because the ECB and EU leaders are taking the necessary actions to protect the European Union's integrity. This is a relief rally in the Euro, but it could turn into a longer-lasting uptrend if EU leaders indeed succeed in making Europe a more unified political
entity.
Let's Not Run Ahead of Ourselves With This EUR Rally
Let's not forget that this is just a relief rally in the currency after the great risks have been lifted and after the exchange rate stayed depressed for several months.
Furthermore, the ECB has a EURUSD rate of around 1.10 in its inflation and GDP forecasts for the next two years. A higher EURUSD exchange rate can hinder the recovery and partially undo the ECB's easing measures.
Although most EU leaders agreed for a recovery fund, the €500-€750 bn proposal still has to be backed by all EU member states, including the frugal 4. There could be many bumps on the road further, so some consolidation for EURUSD seems likely and would be healthy at this point. With that said, there are few reasons to chase the EUR move higher at this point.
And, let's not forget that separatistic forces within the EU are far from dead. EU sentiment in countries like Italy and France is still not rosy, although the market seems to be overlooking that now.
EURUSD Technical Situation
The technicals show an increasingly stretched (overbought) picture on EURUSD, especially on the daily timeframe.
The RSI and our advanced FxTR overbought/oversold indicator, are both entering significant overbought territory (see chart below).
Yesterday, EURUSD reached 1.1350, which is a strong resistance area. The price is showing signs of stabilization here today, but it remains to be seen whether consolidation will start here of EURUSD will go to 1.15 first.
1.15 is the more significant resistance for EURUSD. In addition to notable past highs and lows in this area, the yearly pivot point resistance is also in this area. A break above 1.15 would likely clear the road toward 1.20.
If the consolidation starts here, EURUSD can move back toward 1.12 and maybe even 1.10. Whether this EURUSD rally turns into a longer-term bull trend will depend on the fundamentals.
Below, we discuss the fundamentals of the US Dollar.
Non-Farm Payrolls Likely to Have a Muted Impact on Fx
Turning to the immediate next big even in Fx, Non-Farm Payrolls and US unemployment will confirm the dismal state of the US labor market. But, the impact on the currency market is likely to be muted on this release.
As we saw in many cases over the past few months, economic data is less impactful because all the bad numbers are already expected and priced in to markets. US Unemployment is forecasted to have risen to around 20% in May, while the NFP report is expected to show 8 million American jobs were lost last month.
Dollar Is Falling on Broad Risk Appetite
The Dollar is falling on the back of global risk appetite. The ECB amping up the PEPP purchases is another broad positive factor for risk appetite globally. The second most important central bank in the world taking massive action to support markets is a big deal. Not just the Euro, but risky currencies like AUD and NZD have rallied even more against the Dollar. For as long as risk
appetite remains strong, the Dollar will remain weak, and the Euro will have an edge.
Violent protests in the US are possibly another reason for USD weakness. Furthermore, the US is the hardest-hit country by COVID-19 at the moment, while Europe is easing measures and opening up the economy. So, the divergence theme has turned from a EURUSD negative to a EURUSD positive one in a matter of a few weeks.
Trade signals from the past week
- N/A; Pending buy on EURCHF not triggered
TOTAL: 0 pips profit in the past week
TOTAL: +2725 pips profit since October 1, 2018
If you have any questions or feedback, don't hesitate to reply to this email.
Thank you!
High Risk Warning: Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Any opinions, news, research, predictions, analyses, prices or other information contained in this newsletter is provided as general market commentary and does not constitute investment advice. FX Trading Revolution will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
|
|
|
|
