Weekly Analysis: Price action was choppy last week, apart from Tuesday when we saw a strong bullish push that took the pair into 1.0800 resistance. The buyers remained in control but strength faded after Tuesday’s climb.
The pair has reached a strong resistance zone located between 1.0800 and 1.0850 and we can already see signs of bearish pressure: the Stochastic has reached overbought, candles have small bodies and long wicks and upside momentum is fading. During this week we expect another test of 1.0850, which will decide the next medium term direction. A break of said resistance will make 1.1060 the next target (not necessarily reached in one week), while a bounce will probably generate a drop into the 50 days Exponential Moving Average.
The week starts Monday with the release of the German IFO Business Climate, a survey with a very large sample size of about 7,000 German businesses, focused on their opinions regarding economic and business conditions for the next 6 months.
Tuesday the spotlight shifts towards the US Dollar for the release of the U.S. Consumer Confidence, another survey with a large sample size of about 5,000 households, focused on the respondents’ opinions regarding current and future economic conditions.
Thursday we take a look at German inflation with the release of the German Consumer Price Index and on the US Dollar side we have the U.S. Final Gross Domestic Product, which is the last version in the series of three and tends to be the least impactful but remains a notable indicator nonetheless.
Friday is a rather slow day, with the most notable indicator being the European Consumer Price Index, which shows changes in inflation across the EU.
The Pound benefited from better than expected inflation readings last week and this was the main reason for the pair’s bullish bias. On top of that, the US Dollar seems weak against most of its counterparts and doesn’t show clear signs of strength.
The pair established the 50 days Exponential Moving Average as support last week (broke above it and then bounced off of it) and the next destination seems to be 1.2570. From a longer term perspective the pair is still in a range and this means we should pay attention to the overbought position of the Stochastic, which may be an early warning of a reversal. If 1.2570 cannot be broken we expect to see a drop into the 50 days Exponential Moving Average.
Almost the entire week lacks important releases and Friday will be the busiest day of the week, with 2 important indicators: the British Current Account, which shows the difference in value between imported and exported goods and services and the Final GDP, which is the main gauge of overall economic performance. Other than this, price action will be mainly driven by the technical aspect and the U.S. releases.
Written by: Bogdan Giulvezan