EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(October 05 - October 09, 2020)
Hey! This is Philip with our new weekly outlook of the Forex market.
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EURUSD Technical Outlook:
Last week, we said that a correction of the correction was likely which should take EURUSD toward 1.1750. And, that indeed happened as the pair is now testing this resistance area. If a sell signal occurs here, it’s likely to be followed with a good short opportunity.
The prior lows in this 1.1750 – 1.18 area are now strong resistance, especially after the big red weekly candle from two weeks ago (see chart). A successful retest of broken support should only confirm that there is further downside potential in EURUSD.
The 1.15 area is the key support we are looking at lower. If reached, it is likely to hold off any bearish attempts for the following few weeks.
EURUSD Weekly Chart – Retesting the 1.1750 – 1.18 former support
US Dollar Fundamental Outlook: Trump has COVID, Messy First Debate and Markets Gear Up for US Election
The NonFarm Payrolls and other job reports were slightly weaker than the consensus expected, but that matters little for markets when we have a seismic political event in four weeks such as the US election. The greenback retraced moderately, though it maintained the corrective trend that started two weeks ago.
The first Trump-Biden presidential debate was held last week, and the short sum up is that it was a little mess of two old guys name-calling each other. According to polls, Biden is comfortably in the lead and the likely candidate to win. However, we know that Trump can deliver big surprises (remember 2016 against Hilary), so don’t expect markets to position too much for a Biden win ahead of the election date. With that said, we are more likely to get some
general consolidation across markets and currencies. Therefore, aside from some tactical trades, it may be best to mostly stay flat in the next few weeks. After the election results are out, there should be some big moves in markets, which should provide good tradable opportunities for us.
Trump tested positive for COVID-19 last week but is already getting better by now. He may use this to win some sympathy from voters for the election, but other than that, little impact is likely on markets as long as Trump continues to recover and gets well quickly. This week’s USD economic calendar is relatively light with only the ISM Non-Manufacturing PMI and Fed minutes in the highlights, but that is unlikely to move the dollar much either as the
election will now become all that matters.
Euro Fundamental Outlook: EUR Consolidates; Traders Eye ECB Meeting Accounts This Week
The common European currency was contained and traded mixed without much direction last week. The second COVID-19 wave continues to spread, but new lockdowns are not an option given the negative impact on the economy. The lower death rate compared to March/April is also a positive sign and supports looser protective measures.
The second wave will still hurt the economy to some degree, though. This is why economists expect another round of stimulus from the European Central Bank before the end of the year, likely in December. Based on this, some further correction of the May-August euro rally seems appropriate before it can accumulate enough energy to move higher again. But, that is a discussion for a later time.
The EUR calendar for the week ahead is uneventful, with only the ECB monetary policy meeting accounts scheduled for Thursday (the report is the equivalent of the Fed minutes). Possibly, the report may move the euro if it reveals some details for the ECB’s stimulus plans. On the same note, several ECB members will speak throughout the week.
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