What will I be looking for in the EURO next week?
The EURO had a breakout below the trend line, support level and parabolic channel in the lower chart timeframes.
How will I be approaching the EURO in the coming weeks?
Coronavirus Factor
First, it's important to note that Europe is officially in the second wave of the COVID19 PANDEMIC. Parts of Madrid could be under a second lockdown and this might be seen across different parts in Europe. The concern is that this will affect supply chains which are the lifeline of the Eurozone economy.
The Smart Money vs ECB Factor
Smart money is pulling out of their investments in the equity markets which, as seen this week, has led to fall of indices and ETFs across the board. This might compel the ECB to shore up more monetary support to ensure companies can weather the turbulent months ahead. This week, the ECB said that banks are ready for the impact that will be caused by the second wave of the pandemic. However, this didn't impress investors in Europe and it led to banking ETFs fall to their last levels of support. With this, the Euro will face some downward pressure under possibly, a global hyperinflation situation in the coming months.
The US Dollar, Stimulus Bill & Federal Reserve Factor
As you guessed it, it's an unprecedented situation we are in as traders. This week, the DXY marked its last signal that it was done falling. The US Dollar will be in demand as smart money continues to pull out of the equity markets around the world hence shoring up demand for the haven currency. This kind of outflow was last seen in February and March.
The FED has highlighted that it still has a range of tools it can use to mitigate the damage of the pandemic on the US economy. This includes the massive, most crazy, and never seen before quantitive easing. This is basically the FED buying up securities in the financial markets. Smart money has largely shrugged off last week's increase in FED-backed securities. However, we cannot ignore that the S&P, NDX and DJI indices held above major support levels by Friday's close.
Commitments of Traders
After last week's closing of long positions, hedge funds and institutions have added 17k longs while adding only 4k short positions.
Recommendation:
With this information, I'm expecting one last push upwards to test the daily support turned resistance before heading lower. I'll also will be looking at the EURCHF and EURJPY pairs as the crosses are against safe havens.
How will I be approaching the EURO in the coming weeks?
Coronavirus Factor
First, it's important to note that Europe is officially in the second wave of the COVID19 PANDEMIC. Parts of Madrid could be under a second lockdown and this might be seen across different parts in Europe. The concern is that this will affect supply chains which are the lifeline of the Eurozone economy.
The Smart Money vs ECB Factor
Smart money is pulling out of their investments in the equity markets which, as seen this week, has led to fall of indices and ETFs across the board. This might compel the ECB to shore up more monetary support to ensure companies can weather the turbulent months ahead. This week, the ECB said that banks are ready for the impact that will be caused by the second wave of the pandemic. However, this didn't impress investors in Europe and it led to banking ETFs fall to their last levels of support. With this, the Euro will face some downward pressure under possibly, a global hyperinflation situation in the coming months.
The US Dollar, Stimulus Bill & Federal Reserve Factor
As you guessed it, it's an unprecedented situation we are in as traders. This week, the DXY marked its last signal that it was done falling. The US Dollar will be in demand as smart money continues to pull out of the equity markets around the world hence shoring up demand for the haven currency. This kind of outflow was last seen in February and March.
The FED has highlighted that it still has a range of tools it can use to mitigate the damage of the pandemic on the US economy. This includes the massive, most crazy, and never seen before quantitive easing. This is basically the FED buying up securities in the financial markets. Smart money has largely shrugged off last week's increase in FED-backed securities. However, we cannot ignore that the S&P, NDX and DJI indices held above major support levels by Friday's close.
Commitments of Traders
After last week's closing of long positions, hedge funds and institutions have added 17k longs while adding only 4k short positions.
Recommendation:
With this information, I'm expecting one last push upwards to test the daily support turned resistance before heading lower. I'll also will be looking at the EURCHF and EURJPY pairs as the crosses are against safe havens.
