EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(November 09 - November 13, 2020)
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US Dollar Fundamental Outlook: USD Declines as Joe Biden Wins Race to Be the Next President of the USA
Democratic nominee Joe Biden is set to take over the presidential office from Donald Trump in January after winning the November 3 election. While Trump has not conceded the defeat yet and filed lawsuits at the Supreme Court, investors don’t seem to care much as the chances of him being successful in reversing the election results are slim to none.
The new Biden administration is expected to be much more stable than Trump, more amiable to US allies such as the European Union, and to stop the hostile trade policy that Trump so passionately pursued. All this should lead to a more positive risk environment and ultimately prove supportive for risky assets and less so for safe havens. Hence, the markets reacted to the news by selling US dollars. However, be careful with jumping on the USD bear trend here as
positioning is still very much crowded on the short side. The USD bear trend under Biden will be of long-term nature, and over the short-term, there may be scope for the greenback to rebound still.
Other events on the US economic calendar took a backseat last week. The Fed kept monetary policy unchanged while the Nonfarm payrolls report was mostly in line with expectations. For this week, the calendar is relatively quiet, with only the CPI report on Friday in focus.
However, the markets are not lacking action at the start of trading this week, and the main news of the day is that the Pfizer vaccine for COVID-19 has proven to be effective in 90% of trials. The company announced they will seek FDA approval by the end of this month and aim to have the vaccine widely available in early 2021. This is huge news, and the markets obviously are reacting positively with a sharp risk-on wave
of buying. This trend will likely extend into the following days and weeks.
Euro Fundamental Outlook: EUR/USD Higher on Biden Victory, but Can It Last?
The euro rallied against the dollar once it became clear that Biden will beat Trump in the election last week. But other than that, the single currency stayed mainly neutral versus other currencies due to a light calendar last week.
Not much is on the calendar for this week either, which leaves the euro mainly to be driven by global factors, such as politics and the coronavirus pandemic. On that note, the progress in the development of a vaccine that was announced today by Phizer helped to euro to climb versus the safe-haven currencies, such as the Swiss franc (CHF) and Japanese yen (JPY).
The hard-hit Eurozone economy is likely to experience a double-dip recession due to the second lockdown that many EU countries are currently enforcing. The ECB has, in turn, pledged to deliver more QE stimulus at their December meeting. Overall, these factors should keep a lid on EUR strength for the time being, at least until a significant improvement in the fight against the pandemic is made. If approved, the Phizer vaccine won’t be widely available
until next year, so that leaves at least several more months of fighting COVID-19 with restrictive measures such as wearing masks, social distancing, and national lockdowns.
EURUSD Technical Outlook:
EURUSD poked above 1.19 today, only to quickly reverse back below it. The pair is now testing the 1.18 handle, which is a moderate support zone at this point. Given today’s price action of a fake breakout above 1.19 and then forming a daily bearish engulfing candle, it should only be a matter of time before EURUSD 1.18 breaks too.
A break below 1.18 should open the door toward the 1.16 lows from earlier this month and late September. Here, 1.1625 stands out as a distinct level where the previous two bearish attempts were reversed. Nonetheless, the whole 1.16 price zone will be important and act as support if EURUSD gets near there.
To the upside, the bearish engulfing pattern at 1.19 should solidify the resistance there on the daily chart. Above it, 1.20 is also strong resistance, which means this whole area of 1.1850 – 1.20 is a strong resistance band. EURUSD doesn’t seem ready to push above such a significant area just yet.
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