Weekly Forex Analysis: February 27th to March 3rd 2017


EUR/USD

 

Weekly Analysis: The pair remained below the 50 days Exponential Moving Average last week but price action was mixed and showed strong rejection at support. The FOMC Minutes showed that a rate hike may come fairly soon and this is likely to create US Dollar strength in the near future.

Technical Outlook

 

The support at 1.0525 appeared to be broken last week but price soon returned above it despite hints of a nearing Fed rate hike. On the other hand, the last daily candle is bearish and shows a long wick in its upper side, which is a sign of rejection and a warning sign that the pair may test 1.0525 again. If that support is broken, we expect to see a touch of 1.0460 but a break of this level will probably come only if the U.S. economic data released throughout the week will add USD strength. To the upside, the 50 days EMA is the first strong resistance and as long as the pair is trading below it, our bias is bearish.

 

Fundamental Outlook

 

The week opens Monday with the release of the U.S. Durable Goods Orders, an indicator that shows changes in the total value of purchase orders for goods with a life expectancy of more than three years. Tuesday will be a busier day, with two important releases for the US Dollar: the Preliminary Gross Domestic Product, which is the main gauge of overall economic performance and a Consumer Confidence survey that shows the opinions of about 5,000 households regarding economic conditions and acts as a leading indicator of consumer spending.

Wednesday the first major European indicator will be released: The German Preliminary Consumer Price Index (main gauge of inflation for the German economy) but also the U.S. Manufacturing PMI, a survey of purchasing managers, focused on the health of the manufacturing sector.

Thursday we take a look at overall European inflation with the release of the CPI Flash Estimate and the week ends Friday with the release of the U.S. Non-Manufacturing PMI (also called Services PMI), which is another survey of purchasing managers, this time focused on the services sector.

 

GBP/USD

 

Although volatility increased last week, the pair continued to show mixed movement, without a clear direction and is now trading very close to the 50 days Exponential Moving Average, which is almost flat.

Technical Outlook

 

Thursday’s climb was nullified Friday almost entirely and the pair finished the week very close to where it started it, so not much has changed in terms of direction but at least volatility is higher now and this increases the chances of a stronger move and a potential trend. We recommend caution when trading this pair because as seen from last week’s price action, control doesn’t clearly belong to either side and all moves to one side can be quickly reversed.

 

Fundamental Outlook

 

This week will be focused on surveys of British purchasing managers: Wednesday the Manufacturing PMI will be released, followed Thursday by the Construction PMI and Friday by the Services PMI. All these surveys act as leading indicators of economic health, focused on their respective sector, with higher numbers showing optimism and usually strengthening the Pound. As always, the U.S. releases will have a direct impact on the pair throughout the week.

 

Written by: Bogdan Giulvezan