Weekly Analysis: Last week we saw some bullish action that nullified the US Dollar gains from a week before but the pair was confined in a relatively small range and movement wasn’t strong.
The 50 days Exponential Moving Average is still flat and the pair reverses all directional moves so we can safely say that control doesn’t clearly belong to either side. The first barriers for the pair this week are 1.1240 as resistance and 1.1150 as support; a break of the former will open the door for a touch of 1.1340 while a break of the latter will likely take price into 1.1060. Until the pair breaks one of the two lines, our bias is neutral.
The week starts in full force Monday with the release of the German IFO Business Climate (a large survey of about 7,000 businesses) and Mario Draghi’s testimony before the Committee on Economic and Monetary Affairs of European Parliament. The latter event is prone to trigger high volatility and possibly irregular movement so caution is recommended.
Tuesday focus shifts on the US Dollar for the release of the U.S. Consumer Sentiment, a survey that asks about 5,000 households to give their opinions on current and future economic conditions. Wednesday Fed Chair Yellen will testify before the Committee on Financial Services and another notable release is the U.S. Durable Goods Orders, an indicator that tracks changes in orders for goods with a life expectancy of more than three years. The testimony is of course the more important event of the two and may generate strong US Dollar movement.
Thursday we take a look at the United States Gross Domestic Product (Final version), which is considered the main gauge of overall economic performance and the week finishes Friday with the German Retail Sales and the European Flash Estimate version of the Consumer Price Index.
The pair showed mixed movement last week, initially dropping, then climbing just to fall again during the last day of the week. Movement has slowed down but the latest impulse is bearish.
The bulls attempted to take the pair above 1.3070 but after a small climb above the mentioned level, price dropped and now the door is open for a touch of 1.2865 support. The Stochastic is oversold and looks to cross upwards so we will most likely see some bullish movement this week but as long as the pair remains below 1.3070, our bias is bearish for a touch of the support mentioned earlier.
The week ahead is slow for the Pound as far as economic releases are concerned: the busiest day will be Friday when the Final Gross Domestic Product and the Current Account are released. The former is the main measure of the economy’s health and the latter shows the difference between the value of imported and exported goods and services. Even if there are not a lot of economic releases, this doesn’t mean that the pair will have a slow week in terms of movement and as always, the U.S. events will have a direct impact.
Written by: Bogdan Giulvezan