Weekly Analysis: Last week the pair broke the psychological and technical support at 1.1000, continuing the bearish move started after the bounce at 1.1150. The ECB kept the rate unchanged and President Mario Draghi’s press conference did not move the Euro in a clear direction.
The break of 1.1000 will probably bring in additional sellers that will take price into the low at 1.0911 but overall price action is choppy and candles have long wicks, suggesting indecision. The levels to watch are 1.0800 as key support and 1.1150 as resistance but unless this week’s Fed meeting triggers some strong movement, we don’t expect the pair to break either of them. Minor support sits at 1.0911 and minor resistance at 1.1060.
The week ahead starts Monday with the release of the German IFO Business Climate, a survey that draws its importance from the large sample of about 7,000 businesses that are asked to rate the current level of economic conditions as well as their 6-month outlook. A similar survey but for the U.S. economy is released Tuesday: the Consumer Confidence; this is indicative of future levels of consumer spending and usually had a medium-to-high impact on the US Dollar.
Wednesday is the most important day of the week for the greenback as the Fed will announce their interest rate and will release a statement outlining the reasons behind the decision. No change is expected (currently <0.50%) but the event creates volatility almost always so caution is advised.
Thursday we take a look at German inflation with the release of the Consumer Price Index and the economic week ends Friday with the most important version of the U.S. Gross Domestic Product – the Advance version. The GDP is the main gauge of overall economic performance so its release is considered a high-impact event.
Last week we saw mixed movement on the pound-dollar pair, without any substantial developments but overall price action was bearish. Direction was mostly determined by individual economic releases and the pair remained between support and resistance.
Price action created support around 1.3070 and considering that the latest impulse is bearish, we expect a break of this level early during this week. Such a break would open the door for a move into the zone around 1.2800 but if instead price bounces at 1.3070, it will probably climb into the zone around 1.3280. The Fed meeting scheduled this week will probably be the deciding factor for medium term direction.
The Pound has only one potential market mover on this week’s calendar: the Preliminary Gross Domestic Product, scheduled for release Wednesday. Out of the three versions (Preliminary, Second Estimate and Final), this one is the first and thus tends to have the biggest impact on the market. As always, the U.S. events mentioned earlier will have a direct impact on the pair’s movement.
Written by: Bogdan Giulvezan