EUR/USD Weekly Outlook – February 17, 2021

Last Updated on February 18, 2021

EURUSD Forex Outlook

Introduction

A positive outlook on the rollout of the COVID-19 vaccine and a proposed 1.9 trillion USD stimulus package forced the Greenback to hover around its 2-week lows and lead to growth in riskier currencies, commodities, and stock market prices across US binary options trading platforms.

The success of the UK COVID-19 vaccination hints at a rebound in the economy, making the GBP a major gainer against the USD as it soared above its 1.39 level.

The DXY – USD Index closed last week at 90.249 low, as MUFG analysts project a weaker USD.

EURO and US News

Recent data from the CFTC shows a bearish sentiment towards the Greenback by speculators, with a 29.53 billion US Dollar in net short value.

The JPY, a safe-haven asset, declined by 0.4% against the USD to trade at 105.27, while the EUR increased by 0.1%, an extension of last week’s 0.6% growth.

Setting new record highs for eleven days in a row are global shares again, following optimism towards Washington’s fiscal aid and rollout of the COVID19 vaccine.

The reflation trade recently gathers steam residents from critical markets like the US get vaccinated and an extra 1.9 trillion USD stimulus into the US economy.

The VIX Volatility Index, popularly referred to as the fear gauge, slumps almost to a yearly low, serving as a catalyst to move the MSCI (World Stocks)  by 0.4% this week Monday.

The ES1! S&P 500 E-mini futures increase by 0.5% despite the President’s day holiday.

This week’s signature event is the January meeting where the US Fed released minutes as policymakers decide on rates, giving clues on monetary policy’s potential direction.

We should also expect data releases from the US preliminary February PMI – Purchasing Manager’s Index.

According to UBS Global Wealth Management’s CIO, Mark Haefele, he recommends that investors stick to their long-term financial projections as he anticipates market volatility, which he again perceives as opportunities and not threats.

Joining the equity markets in setting new highs is Oil, reaching its highest level since Jan ’20, following a positive outlook on economic boost from the US stimulus.

The CL1! – US crude Oil increased by 1.2% to trade at 60.21 USD, while the BRCN1! Gained 1.2% to trade at 63.15% per barrel.

EUR vs. USD Long-term Overview: Slowing Bullish momentum

EURUSD Technical Analysis

Monthly Chart

EURUSD Monthly Chart (TradingView) - 17th Feb 2021

Looking at the above monthly chart illustration, we can see that the sellers are building up a bearish case similar to that of 01 Feb ’18 in the form of regular bearish divergence setups.

We may see a similar slump in the EURUSD exchange rate to favor the Greenback if the price breaks below the MA10.

EURUSD: Weekly Chart Bullish

EURUSD Weekly Chart (TradingView) - 17th Feb 2021

Weekly Resistance Level: 1.2349

Weekly Support Level: 1.20114

The bears struggle to bring the EURUSD exchange rates lower after signaling a regular bearish divergence. However, buying activity from resolute bulls keeps the exchange rate above the twenty-period Moving Average.

A collapse of the relative strength index into the oversold area should confirm a change in trend polarity from this time horizon.

EURUSD Daily Chart Projections: Bearish  

EURUSD Daily Chart (TradingView) - 17th Feb 2021

Daily Resistance Level: 1.21696

Daily Support Level: 1.19524

After a series of bullish divergence sent the EURUSD into an upward trend on 10 Dec ’20 and 23 Dec ’20, an opposing series of bearish divergence sent the exchange rate into a downward spiral on 31 Dec ’20 and 07 Jan ’21.

The EURUSD now trades in a bearish trend on the daily-TF, and a hidden bearish divergence in combination with a bearish engulfing candlestick pattern on 16 Feb ’21 is set to send the price lower at press time.

Bullish Scenario:

The bulls hold their ground on the weekly time frame keeping the EURUSD exchange rate within the MA10 and MA20.

An escape from the MA10 to the upside should confirm the resumption of the uptrend.

Bearish Scenario:

Bullish momentum starts to taper off on the daily time frame as the hidden bearish divergence signal a continuation of the decline in the EURUSD exchange rate.

Conclusion and Weekly Price Objectives

Although the USD Index shows some strength at the intraday level, our view from the weekly chart confirms that the long-term outlook for the USD is bearish.

James S. Martin
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