Weekly Analysis: After reaching the weekly target at 1.0525, the pair bounced higher immediately and tested resistance. Most of the Dollar weakness was triggered by a rather dovish stance adopted by Fed Chairwoman Janet Yellen.
After reaching the resistance zone between 1.0650 and 1.0680, which coincides with the 50 period Exponential Moving Average, the pair started to show signs of rejection and now bearish pressure is growing. If the pair cannot break 1.0680 early during the week, we expect the bears to take over and nullify the gains posted by the bulls last week; this will make 1.0525 the target for this week as well, possibly extending to 1.0460. To the upside, if 1.0680 is broken we expect to see a move into 1.0800.
Monday U.S. banks will be closed in celebration of Presidents’ Day, thus no major indicators will be released; the Euro also has a slow day, without notable announcements so we expect a ranging trading session.
Tuesday we take a look at the state of the German Manufacturing sector with the release of the Manufacturing Purchasing Managers’ Index and Wednesday will probably be the most important day of the week for the US Dollar as the FOMC will release the Minutes of their latest Meeting, which will probably offer hints about a future rate hike but also insights into the reasons of the latest rate vote.
Thursday’s only notable event is the release of the U.S. Unemployment Claims, an indicator that shows how many people asked for unemployment benefits during the previous week and the last release of the week is the U.S. New Home Sales, scheduled Friday.
The Pound-Dollar completed another lacklustre week, with price moving almost sideways. The bears made some timid advances, mostly on the back of disappointing UK economic data but support is still holding and neither side is in clear control.
The 50 period Exponential Moving Average is flat, without indicating a clear direction and price is moving sideways, close to support. This has been the situation for a couple of weeks now and the probability of a strong breakout grows with each passing day but the direction is hard to anticipate. It looks like now the bears are trying to break 1.2420 but movement is incredibly choppy and for the time being we recommend caution with this pair.
The Pound also has a lacklustre week ahead, with only one major release: the Second Estimate Gross Domestic Product, scheduled Wednesday. The GDP is the primary measure of overall economic performance but the Second version is less important than the Preliminary so the impact may be mild; however, higher values usually strengthen the currency. As always, the U.S. events mentioned earlier will have a direct impact on the pair’s performance throughout the week.
Written by: Bogdan Giulvezan