Weekly Analysis: Surprisingly, last week’s events did not bring the pair out of its range. Support was breached but the bears didn’t follow through and a worse than expected NFP brought the pair back up, close to the opening price of the week.
The support at 1.1150 appeared broken but the pair decided to do a quick turn and erased the drop. Indecision continues to rule over this pair and now the 50 days Exponential Moving Average is the first point of interest: a move above it will take price into 1.1280 and possibly 1.1340 but a bounce here will mean that 1.1150 will be broken soon. Keep in mind that the moving average is flat and price bounces between support and resistance; a strong breakout is expected.
Monday the banks in the United States will be closed, in observance of Columbus Day and no major indicators will be released for neither one of the currencies in the pair. Tuesday action picks up with the release of the German ZEW Economic Sentiment survey but other than that we don’t have anything important on the calendar.
Wednesday the FOMC will release the Minutes of their latest meeting, containing details about the reasons that determined the rate vote, and more importantly, the document can contain hints about the next rate hike. If this is the case, then the US Dollar will probably have a strong reaction.
Thursday we don’t have anything important on the calendar and the trading week ends Friday with the release of the U.S. Retail Sales and the University of Michigan Consumer Sentiment survey. Both are considered high-impact indicators and can strengthen the greenback in case of higher than anticipated numbers.
The Pound experienced a so called “flash crash” late last week and the pair posted a tremendous drop. Speculation attributes the drop to fears about a hard Brexit early next year but the exact reason is not clearly known.
The pair is currently “high risk” and extreme caution should be used if trading it. Although most of the losses were erased, the possibility of another drop is high as the Pound is vulnerable and prone to sudden moves. Potential resistance sits around 1.2800 but the technical aspect will be overshadowed this week by unscheduled speeches (if any) of British politicians and/or representatives of the Bank of England.
The entire week is slow for the Pound as far as economic releases are concerned. However, we expect strong movement given last week’s tremendous drop and increased volatility.
Written by: Bogdan Giulvezan