Weekly Analysis: Last week Donald trump became the 45th President of the United States, assuming office on January 20, 2017. The pair had a bullish week overall, with US Dollar weakness and remained above the Daily Moving Average.
Even if the bears are making attempts to take the pair lower, the buyers quickly erase them and price ends up higher. This was the case last week when it appeared that the 50 days Exponential Moving Average will be broken to the downside but then price quickly reversed and started to move north, so the bias remains bullish and we expect to see a move close to the resistance around 1.0800. As an alternate scenario, a quick drop below the 50 days EMA would open the door for a touch of 1.0525 support and would make the short term bias bearish.
Monday is a slow day, without major announcements but Tuesday action picks up and we take a look at the health of the German Manufacturing and Services sectors with the release of the respective PMIs. The same day the United Kingdom’s High Court will decide whether the government can initiate or not Article 50 without the approval of the parliament. This will surely affect the Euro as well, not only the Pound so we recommend caution.
Wednesday’s highlight will be the German IFO Business Climate, a survey that tries to gauge the opinions of about 7,000 businesses about economic conditions and a 6-month outlook, while Thursday’s only notable release is the U.S. New Home Sales. Action picks up Friday again with the release of the U.S. Advance Gross Domestic Product and Durable Goods Orders, both important indicators for the American economy and with the potential to strongly affect the US Dollar in the short to medium term.
The Pound strengthened last Tuesday when UK Prime Minister Theresa May delivered a hawkish speech regarding the conditions of the Brexit but the pair remained in a range for the rest of the week.
After a small dip below 1.2090 support, the pair climbed and is now trading very close to the 50 days Exponential Moving Average, with a bullish bias. For this week we expect a move into 1.2480 but from a longer term perspective the pair is still in a downtrend and the 50 EMA is not yet clearly broken, so another move below 1.2090 should not be counted out. The Brexit situation will also play a major role for this week’s price direction.
This week we have only two major events for the Pound: the first is the EU Membership Court Ruling, scheduled Tuesday, and has the potential to be a significant market mover, so extra caution should be used. The second event is the British Preliminary Gross Domestic Product, scheduled Thursday and showing the overall performance of UK’s economy. As always, the U.S. events released throughout the week will have a direct impact on the pair as well.
Written by: Bogdan Giulvezan