For the entire last week the US Dollar dominated and the pair dropped below 1.0600. Since the U.S. Presidential Election result was known, the pair didn’t have any bullish days and the sellers remained in total control.
The huge drop that started with the U.S. Presidential Election will probably continue in the long term but for the time being, the pair is oversold as indicated by the Relative Strength Index and the Stochastic. This means that a retracement has increased chances of occurring and it will be signaled by the oscillators exiting oversold territory. The first possible resistance is located at 1.0710 but the level was last touched a long time ago so a more important level may be 1.0850 because this is the latest level where price showed a strong reaction. To the downside, 1.0525 is the first support.
The first major event of the week is scheduled Monday: the testimony of ECB President Mario Draghi before the European Parliament, In Strasbourg. The topic is the European Central Bank's Annual Report and the financial markets are likely to be influenced by Draghi’s attitude.
Tuesday we have a thin economic calendar, with the U.S. Existing Home Sales being the only notable release. The indicator offers insights into the U.S. housing market, with higher numbers being beneficial for the US Dollar. Wednesday the FOMC will release the Minutes of their latest Meeting; this document offers insights into the reasons that determined the latest rate decision but can also reveal hints about a possible December rate hike. If this is the case, the US Dollar will be strongly affected.
Thursday U.S. banks will be closed, celebrating Thanksgiving Day and no indicators will be released. The holiday will probably affect volatility so it’s very likely to have a choppy trading session. On the Euro side the only notable release is the German IFO Business Climate, a survey of about 7,000 businesses, focused on economic conditions and expectations for the next 6 months. The week ends with a slow day, without major economic releases.
British economic data released last week was mixed, with disappointing inflation numbers but better than expected Retail Sales. However, the pair didn’t seem affected much by the economic numbers and the sellers moved price lower.
After a failed attempt to break the 50 period Exponential Moving Average to the upside, the pair reversed and moved below 1.2480. This makes 1.2090 the first notable support and puts short term control in the hands of the bears. As long as the pair is trading below the 50 EMA and below 1.2480, we favor the short side, aiming for 1.2090, but a move above the mentioned resistance zone would invalidate such a scenario.
The Pound has a lackluster week ahead, with only a few notable indicators: Tuesday the Public Sector Net Borrowing numbers are released, showing the difference between spending and income for government and public corporations. Friday the Second Estimate version of the British Gross Domestic Product is released, but although the GDP is considered a high impact indicator, this version is less important than the Preliminary, which was already released. Nonetheless, higher values show a stronger economy and possibly a stronger currency.
Written by: Bogdan Giulvezan