Weekly Analysis: The first part of last week was bullish but later on, the US Dollar made a spectacular comeback on the back of better than expected U.S. economic data so the week ended with the bears in control.
Price bounced lower near the 1.1200 zone and has now returned below the 50 period Exponential Moving Average. Early during the week we may see small retracements (better observed on the lower time frames probably) but the momentum belongs to the bears and this is likely to generate a break of 1.1060 en route to 1.1000 psychological zone. The Relative Strength Index is pointing downwards and the Stochastic is about to cross, both agreeing with a move lower and strengthening our bearish bias.
After a busy week, now things calm down a bit as the week ahead offers a lackluster environment. The first notable event of the week comes Wednesday in the form of the U.S. JOLTS Job Openings; the indicator shows the number of job openings, excluding the farming industry and offers a look at future levels of employment but the impact is often mild.
Thursday the US Dollar will be affected by the Unemployment Claims, an indicator that tracks changes in the number of jobless people, but Friday will be the busiest day of the week: on the Euro side we have the German Preliminary Gross Domestic Product, the main gauge of economic performance and for the US Dollar the Retail Sales will be the main market mover. Later in the day the University of Michigan will release their Consumer Sentiment, a survey that tries to gauge the overall opinion of consumers regarding economic conditions and acts as a leading indicator of consumer spending.
Last week the Bank of England made the bold decision to cut the interest rate from 0.50% to 0.25% and this stopped bullish momentum, pushing price almost 350 pips lower.
The control now belongs to the bears and the support around 1.3070 is threatened. This week we expect a break of this level and then a continuation of the move into lower territory, with the zone around 1.2800 as target. Keep in mind that the horizontal channel created by 1.3280 resistance and 1.3070 support is not clearly broken so we don’t exclude the possibility of bullish movement if 1.3070 cannot be broken.
Similar to the Euro and US Dollar, the Pound has a slow week ahead, with the only major indicator being the Manufacturing Production released Tuesday. It tracks changes in the total value of output generated by the manufacturing sector and usually has a medium impact on the Pound, with higher numbers strengthening it.
Written by: Bogdan Giulvezan