EURUSD, GBPUSD, USDJPY
Monthly Forex Analysis - What to Expect in the Coming Weeks Ahead of A Busy Fall
Hey! This is Philip with our new weekly outlook of the Forex market.
Before we get into the longer-term Forex outlook, I'd like to let you know that we’ll be away for a two-week holiday starting from next Monday, August 10. You can expect the next weekly analysis on August 24.
EURUSD Technical Outlook:
All eyes are on the EURUSD decade long trendline. The main question being, will it break or not?
We’ve discussed this resistance trendline many times in our weekly posts and Free Forex Newsletter, and the time has now come for the price to test it. To spice things up, the monthly candle closed right at the resistance. Where this and the next months’ candles close will be of particular interest in determining whether we are witnessing a technical breakout or not.
A monthly close above 1.20 is needed for a confirmed bullish breakout of the resistance trendline.
On the other hand, if EURUSD returns below 1.17, and even records a bearish pattern around this area, then we can assume that the pair has returned inside its decade long bearish channel. The first support to the downside is 1.15-1.14. If it breaks, then EURUSD would definitely be back inside the channel.
Euro Fundamental Outlook: EUR Rally Likely To Pause Now Before Reassessment
The euro is rallying because Europe is perceived to be handling the pandemic better than the US. However, the recent stellar euro rally seems to be just as much due to the broad USD bear trend due to EUR optimism. The exchange rate is a relative function, as always with currencies. If the rally was purely driven by positivity toward the euro, then EURCHF – the primary currency pair for pricing EU existential risks - would have also risen notably. But, this pair
has barely moved on the huge news about Next Generation EU. Thus, it’s early to call the recent EUR moves the start of a new broad and sustainable uptrend. That could happen, sure, but more will be needed than just one agreement on a COVID-19 recovery fund.
Add to that the fact that long EUR positioning is reaching extended levels, and the chances for a downside correction are getting realistic. It’s also important to keep in mind that COVID-19 cases are rising in Europe again too, only the pace is slower compared to the US or other hard-hit countries. On the whole, the world is still far from declaring victory over the virus, and that includes Europe as well.
The Next Generation EU Recovery Fund is a much-needed step in the right direction for the Eurozone, but investors will need more evidence that the economic rebound is on track before the euro can unleash a longer-lasting uptrend. For the moment, consolidation is more likely, especially at these levers of major resistance (see EURUSD technical analysis below).
For the week ahead, the EUR calendar is light with no major market-moving events or reports scheduled. The following two weeks are similar, and this further supports the case for EUR consolidation during the upcoming 3-4 week period, before we can reassess the situation again.
This is only a preview of the long-term Fx analysis. Go to the link below to read the Full Monthly Forex Analysis For FREE.
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