WEEKLY ANALYSIS: BREAKOUT SCENARIOS IN PLAY FOR EURO-US DOLLAR, POUND UNDER PRESSURE
EUR/USD
Weekly Analysis: Last week we saw an almost perfect bounce lower once resistance was touched but also some mixed movement generated by the speech of ECB President Mario Draghi during the press conference. He warned that monetary policy may be adjusted in March and this triggered a move into key support.
Technical Outlook
The support at 1.0800 is a major medium term hurdle that needs to be broken if the pair is going to continue south. After the huge daily candle (early December 2015) that initially broke this level to the upside, the bulls failed to continue the move and the pair entered a ranging period which can come to an end if 1.0800 is broken to the downside. Price bounced at 1.0710 so this is an important level too, but the pair seems to react to 1.0800 much better so we consider this a more important level and if it’s broken, we expect a move towards the low at 1.0525.
Fundamental Outlook
The week opens Monday with the release of the German IFO Business Climate, which is a highly respected survey due to its large sample size of about 7,000 businesses. Representatives of surveyed businesses are asked to give their opinion about current economic conditions as well as an outlook for the next 6 months. Usually, higher than expected numbers are beneficial for the Euro.
Tuesday’s highlight is the United States Consumer Confidence survey and Wednesday the FOMC will release the Rate Statement which also contains their decision on the interest rate. No change is expected for the rate but the document may contain clues about the pace of future hikes and if this is the case, the US Dollar will respond with increased volatility.
Thursday we have the German Preliminary Consumer Price Index, which is the main gauge of inflation in Germany and the same day the U.S. Durable Goods Orders (goods with a life expectancy of at least 3 years) are released. Higher than expected values for any of the 2 indicators can strengthen the respective currency although the impact is often mild.
The last important event of the week for the US Dollar is the U.S. Advance Gross Domestic Product, scheduled Friday. Out of the three versions of the GDP (Advance, Preliminary and Final), this is the earliest and tends to have the highest impact, with better than expected numbers strengthening the greenback. The same day the Eurozone Flash Estimate CPI is released, offering insights into the state of inflation throughout the Euro region.
GBP/USD
The pair finally retraced higher last week and came in contact with 1.4350 resistance after establishing a new low at 1.4079, a level last touched in 2009.
Technical Outlook
The overall downtrend is still strong and moves up should still be considered opportunities to enter short-side trades. The last daily candle is a pin bar (long upper wick, with small body) that touched 1.4350 resistance and this is a strong indication that price will move lower this week, probably into 1.4050 support. As mentioned before, this is a very old support (last visited in 2009) and we cannot be sure how price will react to it but considering that last week price reversed in its vicinity, we assume it still has significance for price action. This week we expect a move into the mentioned support but a break of 1.4350 would invalidate such a scenario.
Fundamental Outlook
Only two major events will affect the Pound directly this week: Bank of England Governor Mark Carney will testify Tuesday before the Treasury Select Committee, with the topic being the Financial Stability Report. His speech and the way he answers questions can have a substantial impact on the Pound so caution is recommended.
The second major event of the week is the release of the British Preliminary Gross Domestic Product, scheduled Thursday. This version is the earliest and usually has the highest impact, with numbers above expectations being beneficial for the Pound. As always, the US events mentioned before will have a direct impact on the pair’s direction.
WEEKLY ANALYSIS: EURO-DOLLAR STILL IN A RANGE, POUND DOWNTREND WAVERS, OUTCOME DECIDED BY NFP
EUR/USD
Weekly Analysis: The pair climbed slowly towards resistance during the first 4 days of last week but Friday the US Dollar erased almost all losses and now support is once again threatened. The Bank of Japan introduced negative rates and this had a wide effect on the financial market.
Technical Outlook
If the bears manage to break 1.0800 support, we will see an end of the ranging period and probably a move towards the low at 1.0525 (we don’t expect such a move to happen in one week). We slightly favor the short side but we must note the level at 1.0800 rejected price several times so it is still a strong support and the pair is in ranging mode so another bounce higher is not out of the question.
Fundamental Outlook
The first headline of the week ahead is represented by U.S. Manufacturing data that comes out Monday in the form of the Purchasing Managers’ Index. Tuesday is a slow day, without major announcements and Wednesday we take an early look into U.S. employment situation with the release of the ADP Non-Farm Employment Change. This report is less important than the Government data that comes out 2 days later but nonetheless, a higher than expected number is considered beneficial for the US Dollar.
Thursday no major indicators come out and Friday will probably be the most volatile day of the week as the U.S. Non-Farm Employment Change (also known as Non-Farm Payrolls) is announced. This is considered the most important gauge of employment in the United States and acts as a leading indicator of consumer spending. Almost always the impact is strong and higher numbers strengthen the US Dollar.
GBP/USD
The Pound-Dollar had a back and forth week and all moves were reversed the next day. The bulls didn’t manage to close above resistance and the pair is now near multi-year lows again.
Technical Outlook
Price showed rejection several times at 1.4350 resistance and it seems the bears are trying to regain control but this will not be achieved until 1.4125 minor support is broken. A more important target is 1.4050, a level that was last touched in 2009. A bullish break of 1.4350 would make the 50 period Exponential Moving Average the first target and also a place where bearish price action may resume.
Fundamental Outlook
Monday the British Manufacturing PMI is released, followed Tuesday by the Construction PMI and Wednesday by the Services PMI. These are all leading indicators of economic strength, focused on their respective sectors but lately the impact is strong only if the actual number shows a hefty difference compared to the forecast.
The most important day of the week for the Pound will be Thursday, when the Bank of England will release the Inflation Report as well as their decision regarding the interest rate and a Monetary Policy Summary that will outline the reasons that determined the rate decision. Later in the day, BOE Governor Mark Carney will hold a press conference, discussing the Inflation Report. As always, the pair’s direction will be directly influenced by the US events mentioned earlier.
WEEKLY ANALYSIS: BUYERS MEET RESISTANCE, UPWARDS MOMENTUM STARTS TO FADE
EUR/USD
Weekly Analysis: Last week was bullish, with price advancing into 1.1375 but ending on a bearish note, bouncing below 1.1300. Fed Chair Yellen’s 2-part testimony brought some volatility but overall it didn’t have a huge influence on the markets.
Technical Outlook
The bearish bounce at 1.1375 followed by the move close to 1.1200 zone shows that the bullish momentum is starting to wane and that we will probably see a move into lower territory. The Relative Strength Index and the Stochastic are overbought and starting to move down, improving the chances of a bearish week. The first barrier is the support around 1.1210, a zone that already rejected price higher last Friday; a break of this level would probably add more sellers to the mix and will take the pair lower, towards 1.1100. To the upside, first resistance is located at 1.1375, followed by the key level at 1.1450.
Fundamental Outlook
Monday U.S. banks are closed in celebration of Presidents’ Day so the New York session is likely to show decreased volatility. On the Euro side, ECB President Mario Draghi will testify before the Economic and Monetary Affairs Committee of the European Parliament and this is likely to strongly affect the single currency so caution is advised.
Tuesday’s headline is the German ZEW Economic Sentiment, which is a survey of about 275 investors and analysts regarding their 6-month outlook for the German economy. Wednesday the US Dollar will be strongly influenced by the release of the FOMC Meeting Minutes and Thursday the Philly Fed Manufacturing Index is the only notable event. The trading week ends Friday with a look at Unites States inflation as the Consumer Price Index comes out; this is an important gauge of inflation, which showed disappointing numbers for a relatively long while so an increase is likely to bring US Dollar strength.
GBP/USD
Last week was characterized by choppy movement and no serious advances were made to either side. All five daily candles show long wicks, suggesting indecision.
Technical Outlook
The pair touched three times last week the resistance at 1.4565 and the 50 days Exponential Moving Average but each time it bounced lower. This shows that we are dealing with a strong resistance zone which is likely to drive price lower if it is not broken early in the week; however, the pair is in indecision mode and will remain so until either 1.4565 or 1.4350 is broken. The next direction depends on the direction of this breakout but for extra confirmation, a re-test should follow the initial move.
Fundamental Outlook
The first major release of the week is scheduled Tuesday: the British Consumer Price Index. Numbers above expectations can strengthen the Pound because currently inflation in the UK is considered too low.
Wednesday the British Claimant Count is released, showing the changes in the number of people who applied for unemployment related benefits and the last important event of the week for the Pound is scheduled Friday in the form of the Retail Sales. For most countries, sales made at retail levels represent a major part of overall economic activity, thus a higher number suggests a thriving economic environment and usually a stronger currency.
WEEKLY ANALYSIS: TECHNICAL SUPPORT PUSHES THE US DOLLAR BACK; BEARS EXPECTED TO STRIKE AGAIN
EUR/USD
Weekly Analysis: Last week most of the pair’s earlier gains were erased and support was threatened. It seems that once again the bull-bear battle is undecided and without a clear winner.
Technical Outlook
If the current move south finds good support around 1.1100, we might see a bounce higher and a possible continuation of the previous bullish impulse. The 50 period Exponential Moving Average is in close vicinity and can be another reason for a move up but a break below this technical indicator is likely to bring more sellers into the market; however, we are dealing with a strong support zone (1.1040 – 1.0980) that will be tough to break. As long as price stays above the 50 EMA we favor the long side for a continuation of the earlier move up.
Fundamental Outlook
The week ahead begins with the release of the German Manufacturing PMI scheduled Monday and continues Tuesday with the German IFO Business Climate and U.S. Consumer Confidence. All these are surveys that act as leading indicators of economic health and can strengthen their respective currency but often the impact is mild if the actual number matches analysts’ expectations.
Wednesday’s most notable event is the release of the U.S. New Home Sales and Thursday the Durable Goods Orders come out, as well as the European Final version of the CPI. These are medium impact indicators and the market’s reaction depends many times on the overall environment. Friday will be probably the busiest day of the week as the G20 Meetings start and the German Prelim CPI (main gauge of inflation) is released. Also Friday, the United States will announce the Preliminary version of the Gross Domestic Product; this is the first version and tends to have the biggest impact so we may see a hefty US Dollar reaction.
GBP/USD
The pair remained below the 50 days Exponential Moving Average for the entire last week, showing signs that the long term downtrend might be resuming. Friday the bulls erased some of the losses but overall it was a bearish week.
Technical Outlook
Last week ended above 1.4350 after a bullish bounce at 1.4230 so this impulse is likely to take the pair into the 50 days Exponential Moving Average. If this line is touched, we expect it to act as resistance and to push price lower. A move above the moving average would show that a significant higher low is created (around 1.4230) and would possibly mark an end to the long term downtrend. A push below 1.4230 would open the door for a move into 1.4125 and thus trend resumption.
Fundamental Outlook
The Pound has a very slow week ahead, with the only major economic indicator being the Second Estimate Gross Domestic Product, scheduled Thursday. The GDP is the primary gauge of an economy’s overall performance but the Preliminary version, which has been already released, tends to have the biggest impact. As always, the pair will be directly influenced by the U.S. releases mentioned earlier.
WEEKLY ANALYSIS: US DOLLAR STRONG ACROSS THE BOARD. NFP WEEK TO ‘MAKE-OR-BREAK’ THE NEW TREND
EUR/USD
Weekly Analysis: The greenback made serious advances against its counterparts last week, backed by strong U.S. economic data. Important levels were broken and downside momentum is now starting to pick up.
Technical Outlook
The break of 1.1040 and 1.0980 seen last week shows that the bears are tilting the balance in their favor and that 1.0800 might be the next target. This is a key support level as seen from previous price action (note the grey rectangles to the left – falling price was rejected higher several times) and if broken, it can affect the long term movement of the pair. The Stochastic has reached oversold but the Relative Strength Index doesn’t show an extreme reading so the picture offered by the oscillators is mixed; a move up is likely to find some resistance at the recently broken levels as well as at the 50 period Exponential Moving Average.
Fundamental Outlook
The week starts with the release of the Flash Estimate version of the Eurozone Consumer Price Index scheduled Monday; this is the main gauge of inflation but the German CPI has been already released last week so Monday’s indicator might lack a strong impact.
Tuesday the US Dollar will be affected by the release of the Manufacturing PMI, an indicator derived from the opinions of purchasing managers regarding business conditions in the manufacturing sector. Action picks up Wednesday with a first look at American jobs situation as Automatic Data Processing will release their version of the Non-Farm Employment Change. Although important, the impact of this indicator is lower than the one of the Government jobs data that comes out 2 days later.
Thursday the Euro will be affected by the Eurozone Retail Sales and Friday is a huge day for the US Dollar as the Non-Farm Employment Change (also known as Non-Farm Payrolls) comes out, showing the change in the number of new jobs created during the previous month. This is by far the most important jobs data released by the United States and usually creates increased volatility and possibly sharp turns.
GBP/USD
Last week the long term support at 1.4050 was broken and thus the downtrend has been resumed. The bears made substantial advances and we are likely to see more downside action.
Technical Outlook
Volatility increased and the pair traveled a long distance south, breaking 1.4050 and then re-testing it from below. This level can now be considered resistance and the next potential support is located at 1.3655. However, price last visited the mentioned level in 2009 so we cannot accurately predict how it will react on another touch. The fact that a long distance was covered in a relatively short while makes us believe that some sort of bullish retracement will follow, or at least a period of choppy, sideways movement but the primary trend is clearly bearish.
Fundamental Outlook
This week the Pound’s movement will be influenced by three important indexes: Tuesday the Manufacturing Purchasing Managers’ Index (PMI) comes out, followed Wednesday by the Construction PMI and Thursday by the Services PMI. These indexes are derived from the opinions of purchasing managers from the respective sectors and act as leading indicators of economic health. Usually, higher than anticipated numbers strengthen the Pound and the opposite is true for lower numbers. As always, the pair will be directly influenced by the U.S. data that comes out during the week.
WEEKLY ANALYSIS: MAJOR EVENTS AHEAD: ECB EXPECTED TO FURTHER EASE MONETARY POLICY, BOE GOVERNOR CARNEY TO TESTIFY ON BREXIT
EUR/USD
Weekly Analysis: Although last week begun on a bearish note, the pair soon started to move to the upside, after a bounce near 1.0800 key support. The U.S. jobs market showed improvement and the effects are likely to be seen this week.
Technical Outlook
On a daily chart the pair moved above the 50 period Exponential Moving Average and touched the resistance at 1.1040. The moving average is not completely broken but the Stochastic and Relative Strength Index are starting to gain upside momentum, moving out of oversold territory. This suggests that we will probably see more bullish movement, possibly above 1.1100 and into 1.1200 zone. A lot will depend on ECB’s decision regarding rates so we are likely to see choppy, ranging movement until Thursday.
Fundamental Outlook
The week ahead is very slow in terms of economic releases and in fact, apart for the ECB Interest Rate announcement scheduled Thursday, there’s not much action. Monday the Eurogroup Meetings take place, followed Tuesday by the ECOFIN Meetings but usually these meetings are closed to the press so volatility will increase only if some participants talk to journalists during the day. Once the meetings have concluded, formal statements will be released.
Wednesday is a slow day for both the Euro and the US Dollar and Thursday will probably be the most important day of the week as the European Central Bank will announce the Interest Rate and ECB President Mario Draghi will hold a press conference which is known to create a lot of movement on Euro-pairs, especially during the questions-and-answers session. The interest rate is not expected to change but the deposit rate might go further into negative territory. How this will affect the Euro remains to be seen but it could generate huge movement so extra caution is recommended.
The only notable indicator released Friday is the German Final version of the Consumer Price Index but this is the third and last version in the series and usually doesn’t create strong movement.
GBP/USD
The pair had a completely bullish week, creating a low at 1.3835 and bouncing strongly from there. The British economic data released throughout the week was rather disappointing, suggesting that the climb was generated by technical reasons.
Technical Outlook
The current bullish move shows good momentum and is likely to extend into the resistance zone created by the 50 period Exponential Moving Average and the level at 1.4350. When two or more technical indicators are in close vicinity of one another (in this case the moving average and 1.4350), a confluence zone is formed and usually these zones are tough to break; considering this, we expect price to bounce lower once the said zone is reached. A potential break of the confluence zone will open the door for a move into the zone near 1.4565. Currently the main trend is still bearish.
Fundamental Outlook
Similar to the Euro and the US Dollar, the Pound has a lackluster week ahead, but an important event takes place Tuesday: Bank of England Governor Mark Carney will testify before the Parliamentary Committee with the topic being United Kingdom’s European Union membership. This speech is expected to create strong and maybe irregular moves on Pound related pairs. Caution is recommended!
The British Manufacturing Production is scheduled for release Wednesday. The indicator tracks changes in the overall volume produced by the Manufacturing sector, with better numbers showing increased economic activity and possibly a stronger Pound. Other than this, Friday the British Trade Balance comes out, showing the difference between imported and exported goods. The indicator usually creates only mild movement but if the actual value differs substantially from analysts’ forecast, volatility is likely to increase.
WEEKLY ANALYSIS: ECB DECISION CREATES A PRICE STORM, FED RATE MEETING IS NEXT
EUR/USD
Weekly Analysis: Last week was “governed” by European Central Bank’s surprising decision to cut the interest rate to 0.00% and the deposit rate to -0.40%. A price storm soon followed, with wild swings and sharp reversals, creating an ambiguous environment.
Technical Outlook
Usually a rate cut weakens the currency and initially the Euro did what it was “supposed” to do but soon after it decided to strengthen and move into 1.1210 resistance. This massive swing is likely to influence this week’s price action and now the downside seems difficult although one can argue that a weak Euro was the ECB’s goal when they decided to cut. If the resistance at 1.1210 is broken early in the week we can expect a move into 1.1375 and even 1.1450 but a down move shouldn’t be overlooked as it still remains a viable option. If this is the case, the 50 period Exponential Moving Average can offer a reliable first target.
Fundamental Outlook
The week starts slow Monday, without any important announcements but Tuesday action picks up with an important U.S. indicator: the Retail Sales. The indicator measures changes in the total volume of sales made through retail outlets and usually has a strong impact on the US Dollar, with higher values strengthening it.
Wednesday will probably be the most important day of the week for the greenback as the U.S. Consumer Price Index (a key measure of inflation) comes out and later in the day the Fed will announce their latest rate decision. No change is expected but a press conference will be held by Fed Chair Janet Yellen and a formal statement will be released. All this is likely to generate strong and possibly irregular movement.
Thursday the focus shifts on the Euro for the release of the European Final Consumer Price Index. This version of the CPI is the least important because German inflation data is already released and so is the European CPI Flash Estimate. Friday’s only notable indicator is the U.S. Consumer Sentiment survey released by the University of Michigan. It tries to gauge the opinions of consumers about current economic environment and is often indicative of near future retail sales levels because a confident consumer often spends more.
GBP/USD
The Pound wasn’t affected by major economic indicators last week but the ECB decision extended its effects on the pair, generating a bullish week and a move above resistance.
Technical Outlook
The pair remained above 1.4125 after bouncing twice off of it and even moved above the 50 period Exponential Moving Average and 1.4350. This makes the short term bias bullish and opens the door for a touch of 1.4565 zone but we have to note that the pair is still in a downtrend (price is making lower lows and lower highs) and the Stochastic has reached overbought so we cannot rule out a move south. If such a move occurs, the 50 period EMA is the first potential support and a place where the pair could bounce higher.
Fundamental Outlook
Two major economic releases will affect the Pound this week: the first is the Claimant Count Change released Wednesday, which shows the change in the total number of people who asked for unemployment related benefits. The second event is the Bank of England rate announcement, scheduled Thursday and accompanied by a statement which will outline the reasons behind the rate decision. Other than that, the Pound has a slow week but the pair will be directly affected by the U.S. events mentioned above.
WEEKLY ANALYSIS: KEY RESISTANCE AHEAD. US DOLLAR POISED FOR A COMEBACK?
EUR/USD
Weekly Analysis: Last week the bullish movement continued, on the back of US Dollar weakness which was mostly generated by the dovish stance of the Fed and their decision to maintain rates unchanged. Previous to their latest meeting the Fed had planned 4 rate hikes during 2016 and now they lowered the expectation to just 2.
Technical Outlook
Price is bouncing at 1.1320 resistance but it’s very possible to see a move into 1.1375. If the pair reaches this mark, a double top is likely to form; this is a bearish pattern which combined with the overbought position of the Stochastic and Relative Strength Index will generate downward pressure and a potential move into 1.1210 or even lower. Although the latest impulse is bullish, overall price is ranging and this favors a bounce into lower territory but a bullish breakout would invalidate such scenario.
Fundamental Outlook
Monday is a slow day but action picks up Tuesday with the release of the German IFO Business Climate, a survey derived from the opinions of about 7,000 businesses regarding economic and business conditions for the next 6 months. The same day the German ZEW Economic Sentiment survey comes out; this is another survey but is based on the opinions of about 275 German investors and analysts. Higher numbers than expected for both surveys usually strengthen the Euro.
Wednesday is another lackluster day, followed Thursday by the U.S. Durable Goods orders, an indicator that measures changes in orders placed for goods with a life duration of at least 3 years. Friday most European banks will be closed in observance of Good Friday and the United States release the Final version of the Gross Domestic Product. Although this is the least important version, better numbers can still have a positive impact on the US Dollar.
GBP/USD
The pair bounced strongly at support last week and continued higher although the Band of England maintained the rate unchanged. Most of the bullish movement was generated by the Fed meeting and greenback weakness.
Technical Outlook
The current climb is likely to continue into the zone surrounding 1.4565 but once it gets there we expect a bounce lower. This potential move lower is likely to find support at the 50 period Exponential Moving Average or at 1.4350 but keep in mind the downtrend is severely weakened now so we may see the start of an uptrend or a period of ranging movement. The Stochastic is overbought, favoring a move south but the Relative Strength Index doesn’t show an extreme condition so the picture painted by the oscillators is blurry.
Fundamental Outlook
The week ahead is slow, with the main event being the British Consumer Price Index scheduled for release Tuesday. This is the main gauge of inflation and usually a higher number is beneficial for the Pound, especially since the current value is considered too low. Thursday the Pound will be affected by the British Retail Sales release and Friday UK banks are closed, celebrating Good Friday. As always, the U.S. events released throughout the week will directly affect the pair’s behavior.
WEEKLY ANALYSIS: EASTER HOLIDAY, AMERICAN NON-FARM PAYROLLS TO TRIGGER ERRATIC MOVEMENT
EUR/USD
Weekly Analysis: For the entire last week price moved lower at a slow but steady pace. The economic data was mixed and price action was affected by the approaching of the Easter Holiday.
Technical Outlook
The slow bearish grind is likely to continue until 1.1100 is touched but here we expect brief retracements to the upside. The 50 period Exponential Moving Average is in close vicinity of the mentioned support level, thus creating a confluence zone that will be hard to break by the bears, so the chances of a move up will increase here. Overall the pair is in a ranging period, without a clear trend and the Daily Stochastic is moving down, coming out of overbought; this increases the chances of an extended bearish move but neither side is in clear control and price will be affected by the Easter Holiday.
Fundamental Outlook
Monday European banks will be closed in celebration of Easter Holiday and overall liquidity will be thin and price action irregular. Tuesday the focus is on the US Dollar for the release of the Consumer Confidence survey and the same day, Fed Chairwoman Janet Yellen will deliver a speech titled Economic Outlook and Monetary Policy.
Wednesday the German Preliminary Consumer Price Index is the main indicator on the Euro side, while the US Dollar will be affected by a first look into the American employment situation with the release of the ADP Non-Farm Employment Change.
Thursday European inflation takes center stage again as the Flash Estimate version of the CPI is released but the most important event of the week takes place Friday: the release of the U.S. Non-Farm Payrolls. This is widely considered the main gauge of employment in the U.S. and shows how many new jobs were created during the previous month. Usually the US Dollar moves strongly when this indicator comes out, so use caution at the time.
GBP/USD
Last week the bears took back control and erased all losses incurred a week before, taking price into the support at 1.4050 and generating a strongly bearish week.
Technical Outlook
Although the long term downtrend is severely weakened, the buyers cannot make significant advances and the pair is not making higher highs, a fact which suggests that we will see moves lower in the near future. The first barrier is represented but the support at 1.4050, followed by the important low at 1.3835, while to the upside the 50 period Exponential Moving Average represents the first potential resistance. The oscillators are rather mixed, slightly biased towards the short side.
Fundamental Outlook
The Pound has a slow week ahead and only a couple of events have the potential to become market movers: Thursday Bank of England Governor Mark Carney will hold a press conference in Tokyo at the Financial Stability Board Plenary meeting. As always when heads of central banks speak publicly, caution is advised because the respective currency may show irregular movement and possibly sharp turns.
Friday the British Manufacturing Purchasing Managers’ Index is released, showing the state of the manufacturing sector according to the opinions of purchasing managers from said sector. Better numbers usually strengthen the Pound but the impact is sometimes muted. Throughout the week, the pair will be directly affected by the U.S. indicators, mainly the NFP.
WEEKLY ANALYSIS: BULLS’ STRENGTH FADES, BEARISH PRESSURE BUILDS UP
EUR/USD
Weekly Analysis: The entire last week was bullish and the pair came very close to the resistance at 1.1450, which represents a key level for medium term price action. All this happened despite a higher than expected number of new jobs created in the U.S.
Technical Outlook
The bullish momentum is starting to fade and long wicks start to appear in the upper part of candles. Friday we saw some bearish action triggered by the NFP release but overall, movement was mixed and the gains made by the US Dollar were erased. However, we are likely to see the effects of the encouraging NFP extend throughout this week and we expect the pair to move south, towards the 50 period Exponential Moving Average.
Fundamental Outlook
The week ahead is not filled with a lot of economic releases but here are some of the highlights: Tuesday the U.S. Non-Manufacturing PMI will offer insights into the opinions of about 400 purchasing managers about the state of the economy, excluding the manufacturing industry. Wednesday the latest FOMC Meeting Minutes are released, showing details about the reasons that determined the decision to maintain rates unchanged in March; usually this release creates strong volatility if the document contains some hints about the future pace of rate changes.
Thursday ECB President Mario Draghi is scheduled to deliver a speech about the European financial and economic situation at the Portuguese President's Council, while Fed Chairwoman Janet Yellen will participate in a discussion at the International House, in New York. Both these public appearances can become market movers but can also go mostly overlooked by market participants. Either way, caution should be used. Friday lacks major releases.
GBP/USD
Last week the Pound had a strong start but almost all gains were erased by the US Dollar strength created Friday when the Non-Farm Employment Change report came out.
Technical Outlook
Price action is confined within a triangle pattern and the breakout is likely to determine the next medium term direction. The resistance at 1.4350 was briefly breached last week but as we saw, the greenback is starting to gain back some strength and now the pair is headed towards 1.4050 once again. Also, a higher high has not been printed so our view is bearish-to-neutral until price breaks out of the mentioned triangle.
Fundamental Outlook
The week opens Monday with the release of the British Construction PMI, followed Tuesday by the Services PMI. Both are surveys of purchasing managers which offer insights into the state of the respective sector and can have a positive impact on the Pound if better numbers are posted. The other important event of the week ahead is scheduled Friday in the form of the Manufacturing Production, an indicator that shows changes in the total value of output produced by the manufacturing sector. Same as with the other 2 indicators, a higher number is beneficial for the Pound and as always, the U.S. events will have a direct impact on the pair’s movement.
