Independent Analyst: Thibault Moirez
Date: 2 December 2019
The EURUSD pair saw significant action on Friday as it fell below the 1.098 support line before recovering to 1.101 in intraday trading. The sharp drop appeared to catch investors off guard and triggered a large short-covering rally pushing the price higher before market close.
With the US thanksgiving holidays shortening the week, trade volumes were especially low. The EURUSD typically sees the most trading activity in the market. However, this week highlighted how thin market liquidity was, as Monday saw the narrowest trading range in 20 years. Short term volatility readings for the EURUSD remain low at 4.27% down from 7.16% in January.
Broadly speaking, the US dollar is supported by an upbeat outlook on the US economy. US annual gross domestic product grew to 2.1%. The Federal reserve is optimistic on labour market strength and is eyeing a potential rebound in business investment. The EU on the other hand is not showing the same positivity in their economic data. Falling German inflation figures and a surprise collapse in retail sales will continue to weigh on the euro in the coming week.
The direction of the EURUSD will likely be determined by how traders react to the area above the 23.61% retracement level. Should there be a solid follow through above the 2018 downtrend, selling pressure should reappear to bring the price back in line with the main trend. However, with the closing price reversal bottom formation seen on Friday, we could see short term upside momentum for the next 2-3 days. This movement should prove temporary and serve as a small counter-trend rally. Overall the downside bias is expected to continue unless the pair manages to rally past 1.103.
Next week will see the final PMI figures for the US and the Eurozone as well as the EU’s Q3 GDP. Furthermore, there will be the monthly release of the non-Farm payrolls on Friday which will surely provide some volatility to the market.
All the information mentioned above only represents the view of corresponding PT. Mentari Mulia Berjangka. The information, opinions and analysis contained herein are based on sources believed to be reliable but no representation, expressed orimplied, is made as to its accuracy, completeness or correctness. PT. Mentari Mulia Berjangka is not responsible for the content of any analysis, advice, comment, suggestion, research report or market data in this article and link to third-party resources.