Weekly Analysis: The pair completed a bullish week and moved above the 50 days Exponential Moving Average. The Fed maintained the interest rate unchanged and the NFP report somewhat disappointed, contributing to the strong move up.
Price is now trading above the 50 days EMA, placing the pair in a bullish environment from a short to medium term perspective. However, a clear trend is not in place, the oscillators are approaching overbought and the resistance at 1.1150 sits in front of rising price; all this may suggest that we will see a bounce lower once 1.1150 is touched. If this occurs, price will likely retrace to the 50 EMA but a clean break of 1.1150 will make 1.1250 the first potential target.
The week ahead starts Monday with the Eurogroup Meetings and continues Tuesday with the ECOFIN Meetings. However, the more important event is the U.S. Presidential Election that also takes place Tuesday and will probably overshadow the Meetings. The US Dollar may react strongly to the result of the election so we recommend caution throughout the day.
Wednesday and Thursday have a lackluster economic calendar, while Friday’s only notable release is the University of Michigan Consumer Sentiment, a survey that tries to gauge the confidence of consumers in overall economic conditions. As you can see, we have a slow week ahead, but this doesn’t mean that price movement will be slow, especially considering the huge event that is the U.S. Presidential Election.
The Pound won last week’s race against the US Dollar and we saw a move outside the horizontal channel. This week’s price action will probably reveal if the break is true or just a fake move above resistance.
The pair moved above 1.2480, which represents the upper part of the horizontal channel but now it’s sitting right on the 50 days Exponential Moving Average. The break of 1.2480 is not yet clear (the level was not re-tested after the move above it) and the moving average is likely to offer resistance so we may very well see a bounce lower. If price moves above the 50 days EMA, the chances of a move into 1.2800 zone will increase, while a move back inside the channel would mean that the ranging period is still not over.
The busiest day of the week for the Pound will be Tuesday when the Manufacturing Production numbers come out, as well as an estimate of the British Gross Domestic Product, provided by the National Institute of Economic and Social Research (NIESR).
The first indicator tracks changes in the total value of products generated by the manufacturing sector, and the Gross Domestic Product is an economy’s main gauge of performance, so higher numbers usually bring a stronger currency (however, keep in mind this is only an estimate). The U.S. Election will have a direct and probably strong impact on the pair’s direction.
Written by: Bogdan Giulvezan