Weekly Forex Forecast: Eyes on the EURUSD

A quick recap of last weeks price action on the EURUSD...

Wednesday: bulls out of steam and bearish pattern formed

The EURUSD lost vital ground on Wednesday after retesting the lows of the 2008 financial crisis. The 1.2325 area was a key area to keep an eye on as that proved to attract a lot of selling pressure. Clearly, Wednesday’s high of 1.2323 was all Euro bulls could manage last week. The session was an interesting one and price action formed a (quasi-)bearish engulfing pattern, signalling that a pullback was likely.

Thursday: some support at the 1.21

Thursday’s session found support at the 1.2160 handle. Support held, buyers were coming in to rejoin the fight and the bullish momentum carried into the early hours of Friday but was ultimately cut short.

Expect near-term weakness

Looking at the Weekly chart we can see a bearish pin bar being produced. Adding to the bearish sentiment would also be Wednesday’s engulfing pattern. These key price structures are very clear and hint at near-term weakness. The odds are that as long as 1.2325 holds as resistance, the EURUSD is likely to pull back to a level of prior support.

View larger price chart: https://www.tradingview.com/x/q8gDgAV7/

Looking at the coming trading week

Because we favour with trend trades only and the fact that the EURUSD is still in a clear uptrend (daily chart) we will be looking for long positions only. The lower the market, the more attractive risk-reward ratio will be!

Where might the EURUSD pair find support this week?

A good place to be looking for possible bullish setups would be at Thursday’s low point just above 1.2160. A close below that would expose the early January highs at 1.2070 followed by the pivot at 1.1930.

Key economic drivers this week

• The outcome of the vote in Germany (It will likely be a very active 24 hours for the Euro regardless of the outcome of that vote in Germany)
• U.S. government shut down on Saturday (this will no doubt influence the USD price)

These are the 2 major price influencers, but there are more major news events planned for this week that could have an impact on the EURUSD.

For a complete list of economic events please visit: https://www.myfxbook.com/forex-economic-calendar

Thursday’s session also promises to be an eventful one with an ECB rate decision at 7:45 am EST followed by a presser at 8:30 am EST.

As a technical trader, you want to keep an eye on these news events and how price reacts to them. The decision of whether to buy or sell will come from signals on the chart and the key levels outlined below.

For a larger chart view: https://www.tradingview.com/x/8614MP2i/

What are the big players up too?

Net EURUSD position indicator decreased but didn’t reverse and large speculators support the technical trend, which is upwards. Professionals’ opinion corresponds to the market technical picture that is bullish.

What is the sentiment on US Dollar Index (DXY)?

Hourly: Strong Buy | Daily: Strong Sell | Monthly: Strong Sell

The USD index remains in a bear trend. The market is in the correction on the Daily timeframe and a pullback selling opportunity will appear after its completion. The higher a pullback signal is formed, the more attractive risk-reward ratio will be. Short positions will remain relevant until the market is below the nearest resistance level, the highs of January 9-10.

COT net position indicator decreases along with the market and CFTC reports indicate that large speculators are actively selling USDX and hedgers are buying. The professionals’ opinion corresponds to the Daily trend direction.

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