FOREX TECHNICAL ANALYSIS: A CRUCIAL WEEK FOR THE EURO – ECB INTEREST RATE AHEAD
EUR/USD
Forex Technical Analysis: Last week the Euro showed signs of strength as European inflation rose to 0.7% and overall we had a bullish week although the US Non Farm Employment Change showed a hefty increase. The uptrend is still intact but we didn’t see substantial advances.
Technical Outlook
The uptrend line drawn from last July is still rejecting price higher and the Relative Strength Index is not showing an overbought condition of the pair, so bullish moves can be expected. The week closed above 1.3830 so momentum still favors the bulls and 1.3965 may be the first target, followed by the psychological resistance at 1.4000. Support is represented by the uptrend line and by 1.3700.
Fundamental Outlook
The economic week starts Monday with the release of the US Non Manufacturing PMI which is a survey focused on economic health, excluding the manufacturing sector. Tuesday the US Trade Balance is released, showing the difference between imported and exported goods.
Fed Chair Janet Yellen will testify Wednesday in Washington DC, in front of the Joint Economic Committee of Congress and her speech, as always, has the ability to generate sharp moves depending on the matters discussed and her attitude. Probably the most important day of the week will be Thursday when the ECB will announce their decision regarding the Interest Rate. Mario Draghi indicated that a rate adjustment is in order if the Euro Zone inflation doesn’t pick up, so we will have to wait and see if the latest CPI increase is enough for the ECB to leave the rate unchanged. A Press Conference, which is another reason for increased volatility, will follow shortly.
Friday will be a slow day in terms of economic releases, with the only notable indicator being the German Trade Balance.
GBP/USD
The Pound continued to gain against the US Dollar during the course of last week as the United Kingdom showed more signs of economic expansion and as a result the pair printed a new 4-year high at 1.6920.
Technical Outlook
Without a doubt the pair is controlled by the bulls at the moment and we are likely to see moves higher this week, but before that can happen, a retracement is needed, considering the position of the Relative Strength Index (overbought) and the fact that we experienced a long period of upwards movement. The first major support is represented by 1.6750 and moves lower are likely to be rejected from there.
Fundamental Outlook
The first notable release that can affect the Pound is the British Services PMI which comes out Tuesday, showing the level of optimism among purchasing managers from the Services sector. Thursday the Bank of England will announce the Interest Rate and the Asset Purchase facility value but no change is anticipated for either of them and significant moves are not expected. United Kingdom’s Manufacturing Production is released Friday, potentially strengthening the Pound if better numbers are posted. The US events mentioned earlier will also have a direct and high impact on the pair’s movement.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: MAJOR SUPPORT LEVELS THREATENED. WHAT WILL BE THE ANSWER OF THE BULLS?
EUR/USD
Forex Technical Analysis: The week that just ended was mainly characterized by Euro weakness generated by speculation that ECB will implement more measures to improve the current economic situation. Although the measures weren’t specified, a rate cut in June is at the top of the list.
Technical Outlook
The break of the long term uptrend line generated additional bearish impulse and took price into 1.3700 support. Although price moved briefly below this level, a clear break didn’t occur and at the moment we are seeing signs of rejection but momentum favors the bears; if we are going to see a break, price will most likely move upwards before going through the level at 1.3700. If during the week we will see another failed attempt to break support, it will be a sign that bears don’t have enough steam left and that higher prices will follow.
Fundamental Outlook
German Bundesbank President Jens Weidmann will speak Monday at a Symposium in Frankfurt and this will be the day’s only notable event but volatility will mostly depend on the matters discussed and his attitude. Wednesday the Fed will release the Minutes of the latest FOMC Meeting, explaining the reasons that stood behind their latest vote regarding the interest rate. The strength of the movement created by this release varies but if hints about future monetary policy are offered, its importance will increase.
Thursday France and Germany announce their Manufacturing PMIs, which are leading indicators of economic health and of optimism among purchasing managers, with the ability to strengthen the single currency if an increase is posted. The same day the US Existing Home Sales come out, offering insights into the American housing market. Additional information about the housing situation will be offered Friday by the US New Home Sales numbers while the Euro will be influenced by the release of the German Ifo Business Climate, a survey based on the opinions of about 7,000 businesses and focused on current economic conditions and 6-month outlook.
GBP/USD
Last week BoE Governor Mark Carney suggested that a rate increase is not the next thing on their agenda and that more time may pass until the central bank will consider a rate hike. Some market participants were disappointed by the Governor’s stance and lost interest for the Pound, generating a bearish week.
Technical Outlook
From a long term perspective the pair is in an uptrend and the Pound has been one of the best performers this year, but the short term momentum belongs to the sellers and a top seems to be established at 1.6996. If this week price will manage to break the uptrend line drawn from November last year, the uptrend will be severely weakened and the next target will be the support at 1.6600. The level of 1.6750 and the uptrend line create a confluence zone around the point where they intersect and the bears will have trouble breaking it, but if they succeed they will tip the medium term balance in their favor.
Fundamental Outlook
United Kingdom’s Consumer Price Index will be Tuesday’s main event but British inflation is not a concerning issue at the moment so the impact of the release may be milder than usual. Wednesday the Bank of England will make public the votes on the latest interest rate decision, a good opportunity for traders to assess the MPC members’ stance regarding a future rate increase. Retail Sales are announced the same day and the last major indicator for the Pound will be released Thursday in the form of the British Gross Domestic Product. Without a doubt, the pair’s movement will be affected throughout the week by the US events mentioned above.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: SLOW ECONOMIC WEEK AHEAD. FOCUS SHIFTS TOWARDS THE TECHNICAL FACTORS
EUR/USD
Forex Technical Analysis: Speculation about a potential ECB interest rate cut in June continued last week, affecting the pair’s direction and generating a good break of 1.3700. Disappointing economic data for the Euro Zone also contributed to the bearish behavior.
Technical Outlook
The bears continued their “assault” on support levels and 1.3700 was broken in the process, solidifying their control. Although the trend seems to be reversing, the Relative Strength Index on a Daily Chart is showing an oversold condition, a fact which makes us believe that bullish moves will occur in the first part of the week. If this comes true, 1.3700 will most likely serve as resistance which will push the pair lower once it is touched.
Fundamental Outlook
Monday US Banks will be closed in celebration of Memorial Day so there will be no US economic releases but ECB President Mario Draghi will deliver a speech at the European Central Bank Forum, in Portugal. As always his speeches can create a lot of sharp moves, especially if he will offer hints about ECB’s next move regarding monetary policy.
Tuesday the US Consumer Confidence is released; this is a leading indicator of consumer spending and it is based on a large sample of about 5,000 households. Wednesday we have a rather slow day in terms of economic releases and Thursday French and German Banks are closed in observance of Ascension Day. The main event for the US Dollar will be the release of the US Preliminary Gross Domestic Product which can strengthen the greenback if it shows an increase since this is the main measurement of an economy’s overall performance. Friday is again a slow day, with the only notable release being the German Retail Sales which usually move the market strongly if a hefty difference between analysts’ expectations and actual numbers is posted.
GBP/USD
The British economy showed signs of continued improvement and last week we saw an increase in CPI and a better than expected value of the UK Retail Sales. These factors facilitated a climb into 1.6920 but resistance proved too strong and price bounced lower.
Technical Outlook
The resistance at 1.6920 was touched twice last week and it’s pretty clear that for the time being it cannot be broken. This week we expect another attempt to break the uptrend line drawn from last November and a potential test of 1.6750 support. From a medium term perspective, this level is very important and a clean break would imply that bears are starting to shift momentum in their favor.
Fundamental Outlook
For the entire week ahead, economic data will be scarce for the Pound: Monday UK Banks are closed, celebrating Spring Bank Holiday and the only notable event will be the release of the British Bankers’ Association Mortgage Approvals, scheduled Tuesday. This is a leading indicator of house demand because usually houses are purchased with the help of a mortgage. Throughout the week, the pair will be also affected by the US events already mentioned.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: ECB INTEREST RATE – A TURNING POINT AHEAD
EUR/USD
Forex Technical Analysis: Last week we experienced slow movement due to bank Holidays and mixed economic data. No major developments took place and the week ended close to its opening price.
Technical Outlook
The Relative Strength Index on a Daily chart is coming out of oversold territory, increasing the chance of a retracement higher. Last week’s low located at 1.3585 will act as minor support this week, while resistance is located at 1.3700 but price direction this week will be heavily influenced by the ECB’s decision regarding further monetary policy easing.
Fundamental Outlook
The week starts Monday with an important inflation indicator: the German Preliminary Consumer Price Index and continues Tuesday with an even more important one: the Euro Zone Consumer Price Index. Inflation has been a major concern of the ECB lately because it’s highly correlated with a potential rate change so the release may have a higher impact than usual.
Wednesday the Group of 7 (G7) meetings start and the US will release the ADP Non Farm Employment Change, a report put together by a private company, which tries to mimic the Government issued data that comes out 2 days later. Thursday has the potential to be the most important day of the week as the ECB Interest Rate is announced and a Press Conference takes place. The rate is expected to drop from 0.25% to 0.10% and if this comes true, President Mario Draghi will probably explain the reasons of the rate cut during the Press Conference. Both the rate announcement and the Conference will most likely generate huge volatility and caution is highly recommended.
The final high-impact indicator of the week comes out Friday in the form of the US Non Farm Employment Change (also known as Non Farm Payrolls). This is the most important employment data released by the United States and almost always its impact is very strong. Better numbers suggest economic expansion and a future increase in consumer spending, leading to a stronger US Dollar.
GBP/USD
The greenback showed increased strength against the Pound last week, managing to take the pair lower and to break the long term uptrend line drawn from last November.
Technical Outlook
The break of the trend line we just mentioned signifies a major victory for the bears and prepares the stage for a full scale reversal of the bullish trend. However, price returned to re-test the level of 1.6750 and we must wait to see if it bounces lower or breaks through to the upside. Price behavior in close vicinity to 1.6750 will influence the next direction but the crucial fundamental events scheduled this week will determine medium term trend.
Fundamental Outlook
The United Kingdom releases the Manufacturing, Construction and Services PMIs during the first three days of the week respectively and Thursday the Bank of England will announce the Interest Rate decision. A rate change is not forecast but there has been a lot of speculation about an increase in the near future so any hints coming from the BoE about such increase will send the pair north on the back of Pound strength. Special attention must be paid to the US Non Farm Employment report as it will highly influence the pair’s direction.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: REVEALING THE REAL IMPACT OF THE ECB NEGATIVE RATE POLICY
EUR/USD
Forex Technical Analysis: Last week we witnessed a major development: the ECB introduced for the first time a negative deposit rate of -0.10% (banks that keep their money with the ECB will have to pay a fee) in an attempt to stimulate the banks to lend more money. The interest rate was also cut to 0.15% but these two actions had a mixed impact on the market.
Technical Outlook
The initial impact of ECB’s actions was bearish and price traveled fast to 1.3500 but within a few hours, all Euro losses were erased and the pair climbed back. From a strictly technical perspective, the support at 1.3585 is holding and a move higher is in order, but considering the unprecedented ECB decision, a move into 1.3480 becomes a distinct possibility. For the time being, increased caution is recommended until 1.3680 or 1.3585 is broken.
Fundamental Outlook
Monday French and German banks will be closed, celebrating Whit Monday and no major US data comes out so we are likely to experience a slow day, characterized by irregular volatility. The French Industrial Production numbers are released Tuesday morning while Wednesday will be another day without special announcements from either Europe or the United States. Thursday the ECB Monthly Bulletin is made public, showing the data which was taken into consideration when the rate decision was made and revealing the Bank’s outlook on future economic conditions. The same day the US Retail Sales numbers come out, potentially having a high impact on the US Dollar as they represent a major part of the entire US economy.
Friday the United States will release the Producer Price Index and the Consumer Sentiment. The former has inflationary implications as a higher price charged by producers will be eventually passed on to the consumer, while the latter is a leading indicator of consumer spending because a consumer who is confident about economic conditions is likely to spend more.
GBP/USD
The Bank of England decided to maintain the interest rate at 0.50%, a fact which didn’t come as a surprise and which didn’t create a lot of movement but overall we had a bullish week.
Technical Outlook
At the moment the pair is re-testing from below the uptrend line which was previously broken. This is the first area of resistance and also a place where downwards movement can resume. We can also notice a downtrend line which creates a confluence zone of resistance and increases the chance of a bearish move this week. A bounce lower will encounter support at 1.6750, followed by the important zone at 1.6600.
Fundamental Outlook
Tuesday the British Manufacturing Production comes out, tracking changes in the output produced by manufacturers and acting as a leading indicator of economic health; the same day an estimate of UK’s Gross Domestic Product is released, potentially affecting the Pound as the GDP is the main gauge of overall economic performance.
The other major British event of the week is the release Wednesday of the Claimant Count Change, an indicator which shows the change in the number of unemployed people who claim social help. A higher number is considered bearish for the Pound as it suggests a contracting economy. As always, the US events will have a direct impact on the pair’s direction.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: ECB AND BOE MONETARY POLICIES START TO DIVERGE. THE TWO CURRENCIES MOVE FURTHER APART
EUR/USD
Forex Technical Analysis: The Euro weakened throughout last week as the effects of the ECB decision to lower the interest rate and to introduce a negative deposit rate started to make their presence known. The pair broke 1.3585 support but the bears ran out of steam before touching 1.3480.
Technical Outlook
The first major barrier to the downside is represented by the support level at 1.3480 while to the north, resistance sits at 1.3585 followed by 1.3680. We anticipate a touch of support, but a clear break will probably occur only if the move is backed up by fundamental factors. The Relative Strength Index is approaching the 30 level which indicates an oversold market and price will have a tough time traveling south while this condition is present.
Fundamental Outlook
The first important event of the week is scheduled Tuesday in the form of the German ZEW Economic Sentiment, a survey focused on the current and future economic conditions as seen by German analysts and institutional investors. The same day the American Consumer Price Index, which is an important gauge of inflation, is announced.
Wednesday all eyes will be on the US interest rate, the FOMC Economic Projections and the FOMC Press Conference, a cluster of events that will most likely have a huge impact on the market. The Eurogroup Meetings start Thursday and same day the United States will announce the Philly Fed Manufacturing Index, a leading indicator of economic health focused on the manufacturing sector. Friday lacks major events except the ECOFIN Meetings which take place in Brussels.
GBP/USD
The Pound was heavily influenced by Mark Carney’s comments regarding a potential rate increase which may come sooner than anticipated. The impact was tremendous and the pair skyrocketed towards the peak at 1.6996.
Technical Outlook
The pair reached a critical point and at the moment is testing a multi-year high. A break of 1.6996 (1.7000) would open the door for a touch of 1.7040 (visible on a Weekly chart) but a move lower would create a Double Top on a Daily chart, a powerful bearish pattern. The bulls have regained almost total control of the pair but the Relative Strength Index is rapidly approaching an overbought state so we are likely to see price pause here or even retrace slightly lower.
Fundamental Outlook
The Pound will be affected Tuesday by the release of the Consumer Price Index and Wednesday a breakdown of the latest Interest Rate votes will be made public. However, the most important Pound affecting event of the week is scheduled Thursday in the form of the UK Retail Sales which account for a major part of the entire economy and have a strong impact on the pair’s movement. As always, the US events ahead will directly affect the pair.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: EURO LACKS DIRECTION. POUND REACHES MULTI-YEAR HIGH
EUR/USD
Forex Technical Analysis: The week that just ended was filled with mixed data releases and price action was extremely choppy, with a lot of sharp whipsaws as a result. The week was bullish nonetheless and price closed higher, above 1.3585.
Technical Outlook
The long term uptrend has ended once the bullish trend line was broken last month but the bears have reached a barrier at 1.3500 (1.3480) and lately the pair lacks clear direction. The daily range is very low compared to how this pair usually moves and clear intraday trends are rarely seen, but considering the fact that downwards momentum has stopped, we anticipate a climb above1.3680.
Fundamental Outlook
The week ahead starts with German and French Manufacturing data releases scheduled Monday and continues Tuesday with the German Ifo Business Climate and American Consumer Confidence. These are important and leading indicators of economic health and consumer spending, with the potential to heavily influence their respective currencies.
Wednesday’s headline is the release of the US Durable Goods Orders; these goods are more expensive than normal ones because they have a life expectancy of at least three years and a higher number of orders suggest a thriving economy and increased production activity as manufacturers will work to fill the orders.
Thursday lacks major announcements and the last important event of the week is released Friday in the form of the German Consumer Price Index which accounts for a big part of the entire Euro Zone inflation and can have a strong impact on the Euro.
GBP/USD
The Pound continued to strengthen last week, breaking a multi-year high; Fed’s comments regarding a low interest rate which will be maintained for a considerable amount of time weakened the US Dollar and generated another bullish week.
Technical Outlook
The high established last week at 1.7063 will most likely act as resistance in the future and support is located at 1.6996, followed by the bullish trend line seen on the chart above. The Relative Strength Index on a Daily time frame has reached overbought territory and this increases the chance of a drop below the mentioned levels. Mark Carney will deliver two important speeches this week and the pair’s direction will be heavily influenced by them.
Fundamental Outlook
Tuesday the Governor of the BOE, Mark Carney will speak in London at the Treasury Committee Hearing and Thursday he will make another public appearance by participating at a Press Conference regarding the BOE Financial Stability Report which is released at the same time. Both these events will probably have a huge impact on the pair and we are likely to see important developments this week.
Friday, United Kingdom’s Current Account will be released, showing the difference between imported and exported goods; a higher value shows increased demand for the currency and has the potential to take the pair higher. Throughout the week, the US events will have a direct impact on the pair.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: ECB PRESS CONFERENCE AND US NON-FARM PAYROLLS – INGREDIENTS FOR A BREAKOUT
EUR/USD
Forex Technical Analysis: The pair just finished a ranging week when price was confined between support and resistance and economic data didn’t have a strong impact; price movement was less than 80 pips for the entire week from high to low.
Technical Outlook
Last week price slowly crawled upwards and 1.3500 support wasn’t threatened. The bullish push lacks strength and it looks like it won’t be able to break 1.3680 resistance if it gets there so we anticipate a bounce lower. However, if the bulls find the strength to break the mentioned level, the next barrier is located at 1.3785 which will be a high probability turning-point, especially if the Relative Strength Index will indicate an overbought condition at the time. To the downside, 1.3500 remains the main level of interest.
Fundamental Outlook
Monday’s main event is the Euro Zone Consumer Price Index which as we know is the main inflation gauge and shows the change in prices paid by consumers for goods and services. The ECB aims to keep inflation just under 2.0% so the current value of 0.5% is considered too low and further decreases can severely weaken the Euro.
Tuesday the US Manufacturing PMI will be released, showing the opinions of purchasing managers regarding economic health and business conditions in the Manufacturing sector. Wednesday Fed Chair Janet Yellen will speak at the International Monetary Fund in Washington DC and as we know, speeches of heads of central banks can create huge volatility so caution is recommended if trading at the time.
Thursday will be the week’s most important day as the European Central Bank will announce the Interest Rate and Mario Draghi will hold a Press Conference explaining the reasons behind the Rate decision and will possibly offer hints about future monetary policy direction. The same day the US Non Farm Payrolls will be released, showing the change in the number of new jobs created, excluding the farming sector. It is considered the most comprehensive measure of employment in the United States and it is almost always a strong market mover.
Friday the United States celebrate Independence Day so US banks will be closed and no economic data will be released. This is also the reason why the Non Farm Payrolls are not announced Friday, but a day earlier.
GBP/USD
The Pound had a mixed week as BOE Governor Mark Carney adopted a hawkish stance during his speech and reversed a previous move below 1.7000.
Technical Outlook
The pair is close to the multi-year high located at 1.7063 and the Relative Strength Index is hovering close to the 70 level which indicates an overbought condition of the market. On top of this, the bullish momentum seems dampened and a bearish retracement might be in order unless positive economic data is posted by the United Kingdom. The first major support is located at 1.6750 but such a move is probably too much to happen during a single week considering that lately the pair lacks strong movement. Resistance sits at 1.7063 and a break would renew the uptrend, bringing in more buyers.
Fundamental Outlook
Three indexes will be released this week by the United Kingdom: Tuesday we have the Manufacturing Purchasing Managers’ Index, followed Wednesday by the Construction PMI and Thursday by the Services PMI. All three are leading indicators of economic health focused on their respective sectors and they usually have a hefty impact on the Pound, depending on the figures posted. The important US events will have a direct impact on the pair’s movement throughout the week.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: A LACKLUSTER ECONOMIC SCENE TRANSLATES INTO RANGING PRICE ACTION
EUR/USD
Forex Technical Analysis: During the week that just ended ECB President Mario Draghi reiterated that interest rates will remain low for an extended period of time and the employment situation in the United States showed signs of improvement. As a result the pair moved lower for almost the entire week.
Technical Outlook
Last week we saw the bears in control of the pair and price bounced off 1.3680 resistance; the pair is starting to show stronger movement but it is still confined between the resistance we just mentioned and the support located at 1.3500. A break of either one of these two levels would most likely put an end to the ranging period and would generate an extended move in that direction. Although last week belonged to the bears, our bias is neutral until a breakout occurs.
Fundamental Outlook
Economic data is scarce this week and this might generate slow, ranging movement. Monday lacks important news releases while Tuesday the only notable event is the German Trade Balance which will show the difference between imported and exported goods; usually this indicator has a mild impact on the market.
Wednesday the FOMC will release the Minutes of their latest meeting and more often than not, the US Dollar is highly affected because traders will gain insights into the reasons which stood behind the latest interest rate decision and the pace of the bond purchases. Hints about future monetary direction are usually revealed within the Meeting Minutes document.
Thursday the ECB will release their Monthly Bulletin, containing an economic outlook from the Bank’s viewpoint and more information about economic conditions. The French Industrial Production numbers come out the same day, but both events are considered to have just a medium impact on the Euro. The last day of the week doesn’t hold any special reasons for volatility as no major indicators are released.
GBP/USD
United Kingdom’s Manufacturing and Construction PMIs posted better than expected values last week, further strengthening the Pound and taking the pair to new multi-year highs. The US Non Farm Payrolls release created just a brief retracement lower.
Technical Outlook
Although the Pound is showing tremendous strength lately and the British economy continuously shows signs of improvement, we believe that a bearish pullback is in order. For a long time the pair has been moving upwards, without retracements and the Relative Strength Index is showing a clear overbought condition, moving well above the 70 level. The main levels to watch are 1.7180 as potential resistance and 1.7000 as support.
Fundamental Outlook
Tuesday the UK will announce the Manufacturing Production numbers which represent about 80% of the entire Industrial Production and have the potential to further strengthen or to weaken the Pound depending on the reading shown. The same day, an estimate of Great Britain’s Gross Domestic Product will be released.
Thursday will probably be the week’s most important day for the Pound as the Bank of England will announce their Interest Rate decision. Although no change is anticipated, the event will most likely generate strong and potentially irregular movement. As always, the American indicators released throughout the week will have a direct impact on the pair’s direction.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
FOREX TECHNICAL ANALYSIS: ECB PRESS CONFERENCE AHEAD. DRAGHI OFFERS CLUES ABOUT MONETARY POLICY AND PRICE DIRECTION
EUR/USD
Forex Technical Analysis: The US Dollar benefited last week from a surprising growth of the American Gross Domestic Product, but later in the week almost all gains were erased by a disappointing reading of the NFP. As a result, the week closed near its opening price.
Technical Outlook
The Relative Strength Index is moving out of oversold territory and price quickly returned above the level at 1.3400 after piercing through it earlier in the week. An encounter with the resistance at 1.3480 is very likely to happen this week, given the strong bullish momentum generated by last week’s events, but a move above this level will only happen if it’s backed by fundamental events. Immediate support is still located at 1.3400, followed by 1.3295.
Fundamental Outlook
Monday lacks major events for both the Euro and the US Dollar but Tuesday the greenback will be affected by the release of the Non Manufacturing PMI, an index based on the opinions of purchasing managers outside the manufacturing sector.
Wednesday is again a slow day in terms of fundamental events and Thursday will be the most important day of the week for the Euro as the interest rate is announced (no change anticipated) and the ECB will hold a Press Conference, discussing the rate decision and offering hints about future monetary policy. ECB President Mario Draghi will also answer journalists’ questions during the conference and this is usually the time when the highest volatility is experienced. This will be the last high-impact event of the week as Friday no major indicators are released.
GBP/USD
For the entire week that just ended the bears were in control of the pair and important levels of support were broken. The Pound is starting to lose its appeal and the long term uptrend is severely weakened.
Technical Outlook
We expect the bearish momentum to continue, but before that happens, we are likely to see bullish corrections, probably during the first part of the week. The Relative Strength Index is sitting below the 30 level, indicating an oversold market and favoring moves to the north; on top of that, for almost three weeks the pair has been traveling straight down and usually, this type of movement calls for a retracement to the upside. First resistance sits at 1.6920 while support is located at 1.6750.
Fundamental Outlook
The United Kingdom will release the Construction and Services PMIs Monday and Tuesday respectively, followed Wednesday by the Manufacturing Production numbers. Better numbers for all three indicators usually strengthen the Pound as they indicate a thriving economy and optimism regarding business conditions. The Bank of England will announce Thursday the interest rate decision but no change is anticipated from the current value of 0.50%. However, any hints about future rate increases will open the door for speculation and will probably create strong moves.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 5-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.
