Weekly Analysis: The Euro experienced a huge boost coming from Draghi’s hawkish comments made at the European Central Bank Forum, so the pair moved higher for the entire last week, breaking several resistance levels.
The strong move seen last week has renewed the uptrend and took the pair out of the choppiness it was in. Now the picture is bullish once again and the pair is trading above several broken resistance levels, which may turn into support this week. The resistance at 1.1450 is a key level that reversed rising prices in the past and the Relative Strength Index is overbought, so we must be wary of a pullback this week. The first potential support is located at 1.1350 but keep in mind that the US Dollar will be affected by important events this week.
The week starts pretty slow, with the release of the U.S. Manufacturing PMI scheduled Monday and followed Tuesday by a major Holiday: the U.S. Independence Day. American banks will be closed and volatility will be affected.
Wednesday the Fed will release the FOMC Minutes of their latest Meeting, revealing the reasons that stood behind the latest rate vote and Thursday we take a first look at the U.S. jobs market with the release of the ADP Non-Farm Employment Change.
Friday will probably be the busiest day of the week because the Group of 20 (G20) Meetings start and also the US Dollar will be heavily affected by the Non-Farm Payrolls, a report that is widely considered the most important U.S. jobs data.
US Dollar weakness and hawkish comments made by BOE Governor Mark Carney generated a very strong week for the Pound and took the pair more than 300 pips higher.
The Sterling is clearly winning the battle against the US Dollar but the pair is facing a strong resistance at 1.3050 and the Relative Strength Index is very close to overbought territory. These facts make us anticipate a pullback once 1.3050 is reached; even if the level is broken, a retracement lower should soon follow. The next resistance is located at 1.3430 (observed better on a Weekly chart) but we don’t expect price to travel that entire distance this week.
This week will be mainly dedicated to the British PMI series. These are surveys that try to gauge the opinions of purchasing managers from each sector regarding economic conditions and overall health of the respective sector. The Manufacturing PMI is released Monday, followed Tuesday by the Construction PMI and Wednesday by the Services PMI. British representatives will attend the G20 Meetings that start Friday so the Pound may be affected by the talks.
Written by: Bogdan Giulvezan