Weekly Forex Analysis: August 1st to 5th 2016


EUR/USD

 

Weekly Analysis: Last week the pair picked up speed and the bulls managed to break resistance. The Fed maintained the rate unchanged and did not clearly hint towards the next hike; this drove some investors away from the US Dollar and allowed the pair to climb.

Technical Outlook

 

The pair is now trading above the 50 period Exponential Moving Average and above 1.1150 resistance, thus making 1.1200 zone the next target. The Stochastic and Relative Strength Index are moving up, with good momentum, without being overbought, favoring a break of 1.1200. As long as the pair is trading above the moving average, we are slightly biased towards the long side but keep in mind that important U.S. data comes out this week and this will heavily influence price direction.

 

Fundamental Outlook

 

The week starts with Monday’s release of the U.S. Manufacturing PMI; this is not known to be a huge market mover, but higher numbers suggest optimism among purchasing managers from the manufacturing sector and usually the US Dollar gets a boost.

Tuesday is a slow day for both the Euro and the US Dollar but Wednesday action picks up with the release of the ADP Non-Farm Employment Change, and indicator that offers a look into the jobs situation in the United States; the report excludes the farming and government sectors.

Thursday the economic calendar lacks major events and the week ends Friday with the most important release of the week for the greenback: the Non-Farm Payrolls. This is widely considered the main gauge of employment in the U.S. and almost always its release generates huge and sometimes irregular movement. More jobs usually strengthen the USD, while the opposite is true for fewer employed people.

 

GBP/USD

 

The pair had another slow week and remained trapped between 1.3280 resistance and 1.3070 support. The bias was slightly bullish but no major developments took place.

Technical Outlook

 

The resistance at 1.3280 was breached momentarily last week but the latest daily candle shows a considerable wick in its upper side, suggesting rejection. We maintain our neutral bias until the support at 1.3070 or the resistance at 1.3280 is broken but we also believe the breakout will occur this week, considering the key British and U.S. events.

 

Fundamental Outlook

 

Monday, Tuesday and Wednesday the Manufacturing PMI, Construction PMI and Services PMI are released, respectively. These are surveys that try to gauge the opinions of purchasing managers regarding business conditions in the respective sector and act as leading indicators of economic health.

Thursday will be a crucial day for the Pound because the Bank of England will announce the interest rate, which is again expected to change from the current 0.50% to 0.25%. Last month the same forecast was made but the BOE decided to maintain rates so it’s very possible to see the same now but nonetheless, the event will create high volatility. The same day the BOE will release their Inflation Report that includes inflation projections for the next 2 years; BOE Governor Mark Carney will hold a press conference discussing the Report and this is yet another reason for increased volatility.

 

Written by: Bogdan Giulvezan