Weekly Analysis: Last week the pair climbed for over 200 pips, approaching the place where the Brexit move started. A major role was played by the dovish stance of the Fed as revealed by the FOMC Minutes.
The bullish move started at 1.0911 has nullified the major part of the Brexit fall but 1.1340 resistance may hinder further upside action. The Relative Strength Index and the Stochastic are overbought, increasing the chances of a bounce lower from here but the current bias is bullish so if 1.1340 can be broken early in the week, we expect a climb into 1.1415 and possibly 1.1450.
The week ahead is filled with medium-impact indicators and only a few that can really be considered market movers. Monday we don’t have anything on the economic calendar and Tuesday the German Manufacturing PMI will affect the Euro, while the New Home Sales will be the main catalyst for the US Dollar, followed Wednesday by the Existing Home Sales.
Thursday the main focus will be on the German IFO Business Climate, a survey with a huge sample of about 7,000 businesses that asks respondents to give their opinion regarding current business conditions as well as a 6-month outlook. The greenback will be influenced by the release of the Durable Goods Orders, an indicator that chows changes in the total value of orders for goods with a life expectancy of more than 3 years.
Friday the Preliminary version of the U.S. Gross Domestic Product is released, showing changes in the total value of services and goods produced by the United States economy and Fed Chair Janet Yellen will speak at the Jackson Hole Symposium. The exact time is not yet known and will be announced during the week.
Most of the British economic data that came out last week was better than anticipated (including inflation, jobs and retail sales) and this, coupled with the dovish FOMC Minutes, took the pair above resistance.
The current move can be considered just a retracement for the bearish move that took place earlier but 1.3070 resistance was breached so if the bears cannot bring price back below this level, we will probably see a climb into the 50 period Exponential Moving Average. On the other hand, if the break of 1.3070 will be short-lived, we expect the pair to move closer to last week’s low at 1.2865.
Only one major indicator is scheduled this week for the Pound: the Second Estimate Gross Domestic Product. This is less important than the Preliminary version which was already released but it still has a high impact on the Pound because it is the main gauge of overall economic performance. The indicator will be released Friday.
U.K. representatives will participate at the Jackson Hole Symposium that starts Thursday so we may see Pound volatility, depending on the matters discussed.
Written by: Bogdan Giulvezan