Weekly Analysis: The first four days of last week were slow and without major developments but all that changed once the NFP numbers came out, showing a disappointing employment situation in the United States and weakening the US Dollar.
Price bounced at a bullish trend line and is now trading above the 50 period Exponential Moving Average, the oscillators are moving out of oversold with strong bullish momentum and the U.S. jobs report weakened the greenback severely. All this points to an extended climb that may very well take the pair into the zone around 1.1450, so our bias is bullish for the week ahead but we also expect smaller moves to the downside, mainly because usually after such a strong climb, price retraces a bit.
The week ahead opens Monday with a speech of Fed Chair Janet Yellen; she will speak at a luncheon in Philadelphia and will touch the topics of monetary policy and economic outlook so we expect a strong influence on the US Dollar. Tuesday and Wednesday are slow days, without major releases while Thursday’s only notable event is a speech of ECB President Mario Draghi at the Brussels Economic Forum.
The lackluster economic scene extends into Friday when the only major release is the University of Michigan Consumer Sentiment survey. About 500 consumers are asked to rate the current level of economic conditions and usually a higher reading suggests that consumer spending is likely to increase in the near future; this in turn means that economic activity will pick up, bringing a stronger greenback.
Before the NFP data was released, the Pound was losing the battle against the US Dollar, weakening throughout the week. Some of the losses were erased when the U.S. employment data came out but the week still finished lower than it started.
The bullish trend line seen on the chart above still acts as good support as seen from last week’s price action and now the pair is trading above the 50 period Exponential Moving Average. Although these are signs that price may be headed higher, the bulls clearly showed weakness last week and could only make advances on the back of much worse than expected U.S. economic data. Both currencies are weak at the moment but as long as the pair stays above the trend line, we expect further upside, with 1.4650 as target.
Same as the Euro and Dollar, the Pound has a slow week ahead, with the only notable release being the Manufacturing Production, scheduled Wednesday. The indicator shows changes in the total value of output generated by the manufacturing sector but usually has a mild impact on the Pound if the actual number matches analysts’ forecast or comes very close. Nonetheless, higher numbers are beneficial for the currency.
Written by: Bogdan Giulvezan