Weekly Analysis: Last week the pair had a very slow start, with choppy and almost sideways price action; however, the last couple of days made up for the previous lack of movement and the bears managed to take the pair below support.
After pausing at the 50 days Exponential Moving Average, the pair started to show some determination, making us anticipate a continuation of the current bearish momentum. If this is the case, price will probably move towards the support zone created between 1.0525 and 1.0495, which is also the place where the last move up originated, so it’s an important zone for medium term price action. It must be noted that the Stochastic is below its 20 level and the Relative Strength Index is approaching its oversold level; if both oscillators enter oversold and price reaches strong support, we will probably see a bounce up.
The first notable release of the week is the German ZEW Economic Sentiment, scheduled Tuesday. The survey shows the opinions of about 275 German professional investors and analysts regarding current economic conditions as well as a 6-month outlook; it acts as a leading indicator of optimism, with higher numbers strengthening the currency but the effect is usually mild.
The next releases are scheduled Thursday and will affect the US Dollar: the Producer Price Index (an indicator that shows changes in the price charged by producers for their goods) and the University of Michigan Consumer Sentiment, a survey of about 500 consumers that tries to gauge their opinions regarding current and future economic conditions.
Friday we take a look at Unites States inflation with the release of the Consumer Price Index and the same day the U.S. Retail Sales come out, showing changes in the total value of sales made through retail outlets. German banks will be closed in observance of Good Friday, so we expect volatility to be affected.
After another failed attempt to move above 1.2570 resistance, the pair started to drift lower last week, breaking support and shifting short term control towards the short side. However, from a longer term perspective, the pair is still in a range.
The resistance at 1.2570 remains an important level that stopped rising prices once again and triggered a bounce lower, through the 50 days Exponential Moving Average. Even if there are some signs of bearish pressure (bounce at resistance, break of 50 EMA), the control doesn’t clearly belong to either side and the pair lacks momentum. The first level of importance is located at 1.2300, which acts as psychological support (big, round number) but also technical support because price bounced off of it in the past. To the upside, 1.2570 remains the first key level.
The first release for the Pound is scheduled Tuesday in the form of the Consumer Price Index, which is the main gauge of inflation and usually has a strong impact on the currency, with higher values strengthening it.
Wednesday we take a look at British jobs data with the release of the Claimant Count Change, an indicator that shows the change in the number of people who asked for unemployment related benefits, and usually weakens the Pound if it posts a higher number than expected.
Friday UK banks will be closed in observance of Good Friday and this will probably trigger irregular movement on Pound pairs.
Written by: Bogdan Giulvezan