Weekly Analysis: The week that just ended was governed by sharp reversals and overall choppy but volatile movement. The pair breached support and then jumped higher to touch the 50 days Exponential Moving Average, where it reversed again.
The support zone around 1.0366 rejected price higher again but the pair seems to have found resistance at the 50 days Exponential Moving Average and is now trying to move below 1.0525. As long as price remains below the 50 EMA, our view is still bearish but we must note that 1.0366 is a strong support zone that couldn’t be broken on several attempts, so the downtrend may be coming to an end if the bears cannot break this key support soon.
The week ahead is slow in terms of economic announcements; the first notable release is scheduled Tuesday in the form of the U.S. JOLTS Job Openings, an indicator that shows the number of job openings, without taking into consideration the farming industry. It acts as a leading indicator of employment but its impact is often muted.
Wednesday is another slow day, without major data coming out, while Thursday the only notable indicator that can have an impact on the pair is the U.S. Unemployment Claims.
The busiest day of the week will be Friday, with three important releases: the U.S. Core Retail Sales (measures changes in the value of sales made through retail outlets, excluding automobiles), the Producer Price Index (shows changes in the price charged by manufacturers for their goods) and the University of Michigan Consumer Sentiment survey that tries to gauge consumers’ confidence in current and future economic conditions and acts as a leading indicator of consumer spending.
Last week the pair showed bullish behavior but once the 50 days Exponential Moving Average was touched, the direction changed and most of the Pound gains were erased.
The bearish bounce seen at the 50 days EMA may be an indication that the bulls have ran out of steam and that an extended move lower may follow. Our view remains bearish as long as the pair is trading below 1.2480 resistance and below the EMA, and we anticipate a move closer to 1.2090 this week. A break above the two elements that were just mentioned, would open the door for a move into 1.2855 during the weeks to come.
Similar to the other two currencies, the Pound has a lackluster week ahead, with only two notable indicators, both released Wednesday. The first is the Manufacturing Production, a report that shows changes in the total value of goods produced by the manufacturing sector and the second is the NIESR Gross Domestic Product Estimate, which shows changes in the estimated total value of output generated by the economy during the previous 3 months. Other than these two indicators, the pair will be mostly influenced by the technical aspect and by the U.S. announcements.
Written by: Bogdan Giulvezan