EURUSD, GBPUSD, USDJPY
Weekly Forex Analysis
(June 29 - July 03, 2020)
Hey! This is Philip with our new weekly outlook of the Forex market.
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EURUSD Technical Outlook:
The technicals on the weekly EURUSD chart have clearly turned bearish. There are two bearish shooting star patterns in a row preceded by a pin bar, all with tall upper shadows. This is usually a big deal in technical analysis and means there is strong resistance in the area, in this case, around 1.1350.
The daily chart seems less bearish on first look, however, do note that the larger timeframes tend to override the lower timeframes. In this piece, we are taking a closer look at it as we already discussed the weekly chart extensively in previous weeks.
The strong 1.1350 resistance area is evident here too. Particularly, there is a confluence Fibonacci resistance around 1.1380-1.1400, which may be why the bullish attempts on it were fiercely rejected in the past 3 weeks. As usual, any bearish reversal signals are likely to appear on the daily chart before they do on the weekly.
A move to 1.10 will be likely in such a bearish scenario. In the opposite case, a bullish breakout above 1.1350 should take EURUSD toward the 1.15 – 1.16 area.
US Dollar Fundamental Outlook: Renewed Surge In COVID-19 Cases Takes Center Focus
New coronavirus cases in the United States skyrocketed last week and surpassed the previous daily record from early April. The COVID-19 pandemic is making a return to the center stage for traders as now fears are that this new wave of infections can be a serious setback for the expected economic recovery in H2 2020.
While on the one hand, the safe-haven USD should strengthen in a risk aversion market environment, on the other hand, the fact that COVID-19 is hitting the US hard with a second wave while other parts of the world are managing better, may eventually hurt the dollar. This is turning into the main focus for Forex traders for picking the direction of the dollar and other currencies.
Friday is a holiday in the US, suggesting we can expect quiet Fx trading into week's end. The Non-Farm Payrolls and jobs data for June will be released on Thursday as a result. The Fed minutes and the ISM Manufacturing PMI will be released on Wednesday, while the CB Consumer Confidence will be published on Tuesday. On the same day, Fed Chair Powell and Treasury Secretary Steven Mnuchin will testify before the House Financial Services Committee.
However, as noted above, the events on the calendar may have little impact on the dollar, especially if the Government is unable to put the virus pandemic under control soon.
Euro Fundamental Outlook: Traders Are Optimistic on EUR, But Be Careful of a Reality Check
Reports that the US is rethinking about imposing tariffs on the EU took away some more of the EUR-optimism among investors. Technical levels and patterns also seem to play a role in this largely range-bound market for several weeks now.
Additionally, no new developments or progress was reported on the recovery fund last week, capping EUR gains for the moment. While everyone remains optimistic that approval will be granted, there is always the possibility of disappointment in markets. And it's unlikely that the euro currency will extend the uptrend higher without concrete evidence that the corona crisis recovery fund is getting the green light.
The risks for a turnaround in EUR-optimism shouldn't be overlooked considering the highly uncertain nature of the current environment with the pandemic. If, for example, Europe starts to experience a renewed surge in COVID-19 cases - like the US – then the euro will probably find itself sliding lower again.
The EUR calendar is light for the week ahead, and as with other currencies, the COVID-19 pandemic and political actions and decisions will be the main factors to impact the euro.
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