Weekly Analysis: Last week’s main story was the Fed rate hike from <1.00% to <1.25% but also the hawkish Fed press conference. The positive vibe that surrounded the US Dollar reversed an earlier climb towards 1.1300 and brought the pair into 1.1100 territory.
After reaching a weekly high at 1.1295 the pair dropped close to 1.1120 support and now the greenback is benefiting from a positive market sentiment. We expect to see an encounter with 1.1120 and the 50 days Exponential Moving Average early in the week but the pair is still in an uptrend, so once the 50 EMA is reached, we may see another push to the north. However, as long as last week’s high is not broken, our bias is bearish, aiming for a move into 1.1000 territory.
The week ahead is surprisingly slow in terms of economic releases for both currencies in the pair. Monday and Tuesday we don’t have anything major on the economic calendar, while Wednesday’s only notable release is the U.S. Existing Home Sales. A higher than anticipated reading shows a healthy house market and this usually strengthens the US Dollar.
Thursday the focus shifts on the Euro for the release of the Eurozone Consumer Confidence, a survey that gauges the opinions of about 2,300 European citizens regarding economic conditions. Friday the center stage is taken by Purchasing Managers’ Indexes, namely the German Services and Manufacturing PMIs as well as the Eurozone Services and Manufacturing PMIs. On the US Dollar side we have the New Home Sales, an indicator that shows the annualized number of houses sold during the previous month.
The pair has just completed a very choppy week, with price bouncing all over the place, especially in the later part of the week. The Bank of England has kept the rate unchanged but 3 out of the 8 MPC Members voted for an increase and this generated Pound strength.
The last three Daily candles are showing long wicks and rejection at the 50 period Exponential Moving Average. This is a sign of indecision and lack of determination from both sides; the bulls cannot break the 50 EMA and the bears cannot take price lower. Due to these factors, our outlook is mostly neutral until a clear direction is established. However, it must be noted that the 50 period EMA and the level at 1.2770 form together a confluence zone of resistance, which may push price lower during the early stages of the week.
The Pound has an even slower fundamental week than the Euro and US Dollar, and the only notable indicator is the Public Sector Net Borrowing, scheduled Wednesday. The indicator shows the difference between spending and income for the Public Sector and a figure above zero indicates deficit, while a figure below zero shows excess. Lower numbers for this indicators are usually beneficial for the currency but the impact is often limited.
Written by: Bogdan Giulvezan