Weekly Analysis: The pair moved without conviction last week, bouncing above and below the 50 period Exponential Moving Average and between support and resistance. The NFP report showed a worse than expected number, weakening the US Dollar but hawkish comments form a Fed official nullified the move and turned the pair south.
After a failed attempt to break 1.1150 early during the week, the pair climbed and pierced the resistance at 1.1240 but then quickly reversed and finished the week on support. The latest impulse is bearish and the fact that despite a disappointing jobs report, the US Dollar is gaining against the Euro, makes us believe that we will see a break of 1.1150 and a move into 1.1060. If the pair doesn’t remain below the 50 period EMA and reverses direction again, the first target is 1.1240, followed by 1.1340.
U.S. banks will be closed Monday, celebrating Labor Day and no major indicators will be released as a result. On the Euro side we don’t have important releases either but the Group of 20 Meetings (G20) will continue (Sunday is the first day) and this may generate volatility.
Tuesday the United States will release the Non-Manufacturing PMI, which is less important than the Manufacturing PMI but can still create strong movement if the actual number shows a big difference from the forecast.
Wednesday we have another slow day for both currencies in the pair but Thursday action picks up with the important ECB interest rate announcement, followed by Mario Draghi’s press conference. The rate is expected to remain the same (0.00%) but the day of the release is almost always full of strong moves, especially during Draghi’s press conference. Friday the Eurogroup Meetings start but other than that, we don’t have any other major events.
The Pound bulls scored a major victory last week and closed the week at the highest level since July. The Pound benefited from optimistic economic data while the greenback was hit with some disappointing numbers throughout the week.
The resistance at 1.3280, which acted as a strong level in the past, was broken last week. This could be a major victory for the bulls, if they manage to keep the pair above the mentioned level and above the 50 period Exponential Moving Average. During this week we expect the upside to prevail and the pair to move above the minor resistance at 1.3370, towards 1.3500 area but this doesn’t exclude the possibility of smaller moves south, in the form of retracements.
The first release of the week is the Services PMI, scheduled Monday, a survey that doesn’t always have a strong impact unless the difference between actual and forecast is substantial. The next release is scheduled Wednesday: the Manufacturing Production, an indicator that shows changes in the total value of goods produced by the manufacturing sector. The same day we have the Inflation Report Hearings; during these hearings, BOE Governor Mark Carney will testify on inflation before the Parliament's Treasury Committee but the impact differs from meeting to meeting.
Written by: Bogdan Giulvezan