Weekly Analysis: For the entire last week the pair showed choppy movement, with sudden changes of direction. The week ended higher than it started but the downtrend is still intact.
After the touch of 1.0525 support the sellers lost their steam and the pair started to move north but it’s clear that overall there’s still bearish pressure. The Stochastic and Relative Strength Index have exited oversold territory and are moving upwards, supporting an extended move that will encounter the first resistance at 1.0710. If that level is surpassed, the next target may be 1.0800 zone and the 50 period Exponential Moving Average. As long as these resistances are holding, our view is bearish and we expect a move lower after a touch of one of the mentioned zones.
We have a slow week ahead compared to the previous, with only a few important releases: Monday the Eurogroup Meetings take place, attended by personalities from the EU member states. Tuesday the ECOFIN Meetings, attended by Finance Ministers from the EU member states will be the main event but both assemblies may go mostly unnoticed by the market.
Wednesday is a lackluster day and Thursday action picks up with the ECB Interest Rate announcement, which is followed shortly by the usual Press Conference during which ECB President Mario Draghi delivers a prepared statement and answers journalists’ questions. The press conference is almost always a reason for increased volatility and irregular movement.
Friday the US Dollar takes center stage with the release of the University of Michigan Consumer Sentiment, a survey that acts as a leading indicator of consumer spending.
Last week was an important one for the Pound as it finally managed to climb above 1.2480 resistance and above the Moving Average. This marks the end of the ranging period and possibly calls for further upside.
The 50 days Exponential Moving Average was surpassed last week for the first time in a long while (it was breached before but price returned immediately below it) and now price is trading above previous resistance (1.2480). All this makes us anticipate a move into 1.2855 zone and a continuation of the breakout but we don’t exclude a drop to test the recently broken level as well as the 50 EMA. If these barriers reject price, this will solidify the medium term control of the bulls.
Similar or the Euro and US Dollar, the Pound has a lackluster week ahead, with only two notable releases: Monday we have the Services PMI, a survey of purchasing managers regarding business and economic conditions in the service sector and Wednesday the Manufacturing Production comes out. The latter shows changes in the total value of goods produced by the manufacturing industry and can have a positive impact on the Pound if it posts higher numbers because this would suggest increased economic activity.
Written by: Bogdan Giulvezan