Weekly Analysis: The pair ended another sideways week and so far nothing seems to take it out of its slumber. Friday was the most active day, with the Euro weakening due to a Deutsche Bank possible fine imposed by the U.S. Department of Justice for the sale of mortgage-backed bonds.
The 50 days Exponential Moving Average continues to move flat and the pair is trapped between 1.1280 resistance and 1.1150 support. Until one of these barriers is broken, price is in range-mode and neither side is in control, so our bias is neutral but we must warn traders that often after a sideways period, the pair tends to breakout strongly in one direction or the other. This week important U.S. data comes out so we expect the mentioned breakout to happen.
German Unity Day is celebrated Monday, thus German banks will be closed; on the US Dollar side we have the Manufacturing PMI, a survey of purchasing managers that acts as a leading indicator of economic health, focused on the manufacturing sector.
Tuesday is a slow day for the Euro and US Dollar but Wednesday action picks up with a first look at U.S. employment data with the release of the ADP Non-Farm Employment Change, a report that shows changes in the number of employed people, excluding government jobs and the farming sector.
Thursday is another slow day and Friday the U.S. Non-Farm Payrolls come out, showing how many new jobs were created during the previous month. This is widely viewed as the most important jobs related indicator for the United States economy and usually it creates huge movement, with higher numbers strengthening the greenback.
Similar to the euro-dollar, the pair traded mostly sideways and remained below resistance for the entire last week. The United Kingdom didn’t release important economic indicators and this contributed to the lack of action.
The bulls made timid attempts to break 1.3070 resistance but trading volume remained low throughout the week and no major developments took place. The lack of determination from both sides makes our bias neutral but we must note that the 50 days Exponential Moving Average is still moving downwards and price is trading below it; also the resistance at 1.3070 is still holding and all this slightly tilts the balance towards the short side. First minor support is located at 1.2945 (better seen on a 4-hour chart), followed by the more important 1.2865.
The first three days of the week are reserved for the three PMIs that focus on the health of their respective sectors: Monday the Manufacturing PMI comes out, followed Tuesday by the Construction and Wednesday by the Services PMI. These are surveys derived from the opinions of purchasing managers from each of the three sectors and usually a higher value for any of them, brings Pound strength.
The last important release of the week is scheduled Friday in the form of the Manufacturing Production, an indicator that shows changes in the total value of output generated by the manufacturing sector. A higher reading is usually beneficial for the Pound but the impact is limited at times.
Written by: Bogdan Giulvezan