EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(December 14 - December 18, 2020)
Hey! This is Philip with our new weekly outlook of the Forex market.
US Dollar Fundamental Outlook: USD Consolidates, but Downtrend Stays Intact; FOMC Meeting In Focus This Week
As we expected, the dollar consolidated last week after previously falling for three consecutive weeks. The downtrend remains intact, and continuation is a question of “when” not “if.” In fact, the broad dollar index (DXY) has already recorded a new cycle low this morning.
The main event that Fx traders will watch this week is the FOMC meeting on Wednesday. The Fed is expected to keep policy on hold and a neutral stance overall by only extending the duration of QE purchases. This should keep the predominant trends across markets intact for the time being. It’s possible that the dollar may extend the consolidation and even rebound somewhat if the Fed is perceived to be less dovish than expected.
In contrast, last week’s jobless claims were weaker than expected, which argues for a stronger dovish message from the Fed. If they choose this path, then there is little that can stand in the way of the USD bear trend extending lower.
Euro Fundamental Outlook: ECB Unable to Tame EUR’s Rally
The ECB expanded PEPP (QE) purchases by 500 billion euros and extended the program’s duration until March 2022, in line with economists’ forecasts. The euro nudged higher on the event, largely as we anticipated in last week’s analysis, though EURUSD is yet to surpass the high that was established a day before the ECB meeting.
The strong bullish dynamics that drove EURUSD higher will stay in place, and the pair should continue the uptrend sooner or later. The risk-on theme remains in full force, which means the euro is outperforming the safe-haven currencies but not its risky peers. EURJPY and EURCHF also look set to continue their uptrends alongside EURUSD.
The preliminary (flash) Eurozone PMIs are in focus on the EUR calendar this week. Stronger than expected numbers may be just the thing that the euro needs to take the next leg higher. A miss in the expectations may provide an opportunity to enter long at better levels.
EURUSD Technical Outlook:
EURUSD smashed through the 1.20 barrier two weeks ago, and after consolidating for 5 days, tries to attack new highs today. Without a doubt, the uptrend here is strong. The 1.20 resistance was the last obstacle standing in the way, and now that it’s gone, EURUSD is free to rise to the next major resistance area, which is 1.25.
The daily chart shows that the most recent bullish leg is quite steep, which means there may be few retracements to join this uptrend. Another encouraging sign for the bulls is that the pair already broke the consolidation bull flag pattern last week (see chart). Nothing more than shallow retracements look probable at this point.
The 1.20 level is the key support that will keep the uptrend unchallenged as long as it’s not broken.
If you have any questions or feedback, don't hesitate to reply to this email.
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.
|
|
|
|
