EUR/USD Weekly Outlook – February 4, 2021

Last Updated on February 5, 2021

EURUSD Forex Forecast

Introduction

Last week’s surge in some US stocks and recent gains of the USD on popular trading broker like VideForex, shows social media’s power and that the retail investors should not be underrated. 

Although the Forex market did not significantly impact the massive speculations on the GameStop stock, followed by the Silver price, we believe that other recent events will spark other FX pairs like the EURUSD.

Read on for more on these events, charts, and technical setups.

EURO and US News

After a steep sell-off last week, global shares see a rebound followed by an expansion of retail investors battle against Wall Street, causing a sharp rise in the price of silver futures and silver/mining related stocks.

Hedge Funds at Wall Street are forced to cover bets, following GameStop GME shares’ trading frenzy last week.  

These retail investors’ attention is starting to shift to other undervalued US companies, and recently this week, a shift to silver futures and silver mining companies.

Traders and speculators anticipate the negotiations’ impact coming this Tuesday between the US President Joe Biden and Republican Senators over the long-anticipated COVID19 support bill.

Following an overnight Euro sell-off from a decline in consumer spending in Germany due to coronavirus lockdown, the US dollar traded around its seven-week high.

Oil price increased by 1% as the Greenback also sees an increase in demand, as revealed on the USD Index chart (DXY).

Silver surges to an 8-year high following a focus from the retail crowd.

Spot silver and gold prices slumped early Tuesday by 2% and 0.3%, respectively, after silver peaked towards its eight-year ATH following retail investors’ speculations.

An increase in demand for US crude caused by a massive snowstorm in the Northeast US saw the commodity rising by 1.06% when it traded at 54.12USD.

The commodities market’s gains are Brent crude BRN1!, rising to 56.90USD per barrel at 0.98%.

EURUSD Technical Analysis

EUR vs. USD Long-term Overview: Exhausted Bullish Swing

Monthly Chart

EURUSD Monthly Chart - February 4 2021

The bearish divergence on the monthly charts of the EURUSD corresponds with a regular bullish divergence on the USD Index chart (DXY), confirming that the EUR is the most liquid pair and carries the most significant weight in the Index.

We may see a prolonged slowing of the upward trend considering that the pair now trades within the March ’18 resistance region.

Weekly Chart Bullish

EURUSD Weekly Chart - February 4 2021

Weekly Resistance Level: 1.23101

Weekly Support Level: 1.1800, 1.16025

The above weekly chart shows a down correction of the EURUSD exchange rate into the MA ten and twenty buy zone, where we anticipate a price bounce back to the upside.

An entry into and exit out of the RSI oversold area can also reinforce confidence to resume the upbeat campaign.

Daily Chart Projections: Bullish 

EURUSD Daily Chart - February 4 2021

Daily Resistance Level: 1.21896, 1.21561

Daily Support Level: 1.16025, 1.16222

The Greenback stays stable against the Euro as the bears breach critical support levels at 1.21516 and 1.20943 and advance to accumulate more sell pressure from the beginning of February.

A breach of the 1.20502 may hint at a correction of the USD gains.

Bullish Scenario:

The bullish case for the EURUSD is challenged as the pair slowly slumps into a correction phase.

Perhaps the exchange rate may find support at the 1.16121 to 1.18808 support zone if the bears persist below the 1.19201 level.

Bearish Scenario:

The recent fundamental events affecting the Euro reflect the technical charts as regular bearish divergence on the higher monthly and weekly time frames.

Bearish activity may push the price even lower into the 1.18808 and 1.16400 regions. However, we should be mindful of upwards intraday price moves.

Conclusion and Weekly Price Objectives

An increase in demand for the USD continues confirming a positive sentiment towards the US COVID-19 stimulus package.

The downtrend may continue into this week; however, we’d suggest putting proper risk management measures in place to avoid a short squeeze.

 

James S. Martin
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