EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(March 02 - March 06, 2020)
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EURUSD Technical Outlook:
Not only EURUSD reached 1.10 last week, as we suggested here in the weekly analysis, but it also pushed through it closing at 1.1025 on Friday. In Monday trading today, EURUSD is already north of 1.11 on this sharp bullish move after the reversal at oversold levels around 1.08 two weeks ago.
However, the pair is now about to reach a crucial resistance area, namely the 18-month resistance trendline of the bearish channel – standing around 1.1150 currently. EURUSD was distinctly rejected at this trendline 3 times in 2019, and it is likely to be a strong technical area this time too. The pair is also approaching overbought levels on the daily RSI, as another factor that should now help to cap further gains. If EURUSD indeed peaks around the
trendline resistance, the price may revert back toward 1.10.
On the other side of the coin, however, the strong bullish momentum is a sign of caution for bears. Namely, such strong momentum can very often break through technical zones, and it will be no surprise if that happens here too. Such a scenario would likely open the door for further gains toward the 1.1350 and even the 1.15 price zones.
US Dollar Fundamental Outlook: USD At A Test Going Into NFP On Friday After Crashing Together With Stocks
The Dollar took a hard beating last week on a combination of factors - most importantly, falling US stocks and skyrocketing probabilities for Fed rate cuts this year.
The coronavirus outbreak is spreading to many countries around the world and fears that the United States will be the next country to experience a sharp rise in newly infected people triggered the stock market decline last week. Given that the most advanced economies were already slowing down for some time, the virus epidemic is only going to be an additional hit on economic activity. The markets are already expecting the US Federal Reserve to respond with monetary easing measures, which is, by
definition, bearish for the Dollar.
With that said, Forex traders will need to be extremely vigilant in the week ahead as the stock market rattle (which is likely to continue) may continue to cause unexpected/weird movements in currencies. In either case, now that USD sentiment has reversed, the bearish momentum is likely to persist for a while.
However, at this point, it is too early to say that the longer-term USD bull trend is over. In fact, the US economy is still likely to remain in better shape than Europe and the rest of the world (which are hit harder by the coronavirus anyway), and hence the USD Dollar may return on its upward trajectory soon.
Turning to the USD calendar, it is a Non-Farm Payrolls week in which the ISM manufacturing and services indexes will also be released. However, in this environment of broad risk aversion and stocks falling hard, It’s difficult to say how much this week’s US data (otherwise very impactful) will matter for the Dollar, especially on the positive side. On the other hand, if the data is weak or misses expectations in a big way, then that should only add fuel to the
USD decline and risk-off moves from last week.
Find the rest of the weekly analysis (GBPUSD & USDJPY outlook) 100% FREE, at our website below:
Euro Fundamental Outlook: Coronavirus Can Not Be Good For EUR; Short Squeeze Likely To Run Out Of Steam Soon
The Euro was driven sharply higher last week on a short squeeze amid the stock market turbulences and coronavirus fears. Being a funding currency with one of the lowest interest rates in the world, the Euro was an attractive choice for investors when stocks were rising. But, right now, when stocks are falling, domestic European and foreign investors rushed to the exit and converted back to Euros as US equities plunged hard.
However, once the dust settles a little, traders will likely realize that the coronavirus will probably impact the Eurozone economy harder than the US, which in the end, still puts the Dollar on top of the Euro. Considering this, the Euro rally from last week is unlikely to extend significantly higher, at least not on these factors driven by coronavirus fears. The epidemic is hitting China and the Eurozone
the hardest, and both economies were already in decline even before the outbreak. Thus, the coronavirus fears can’t be good for the Eurozone economy or the Euro further down the road.
The EUR calendar for this week features flash CPI inflation, German factory orders, and retail sales among else. However, the calendar is likely to be of secondary importance given the recession fears driven by the coronavirus epidemic, which will be the primary driver for currencies for the time being.
Find the rest of the weekly analysis (GBPUSD & USDJPY outlook) 100% FREE, at our website below:
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