Weekly Analysis: The pair climbed above the 50 days Exponential Moving Average last week, mostly due to concerns regarding inflation in the United States. However, the resistance at 1.1875 couldn’t be broken and now some rejection is present.
After breaking the 50 days EMA, price hit the resistance at 1.1875 and dropped slightly lower but the week ended above the Moving Average. As long as the pair is trading between 1.1875 resistance and 1.1700 support the picture is unclear but early this week we expect to see a break of resistance or immediate support (50 EMA) and the direction of the break will decide the next move. A break of 1.1875 will open the door for 1.2000, while a break of the 50 EMA will probably take the pair into the support at 1.1700.
Monday we don’t have any important indicators, so the first notable release will be German ZEW Economic Sentiment, scheduled Tuesday. However, this survey has a medium impact so we don’t expect huge volatility at the time.
Wednesday ECB President Draghi will deliver opening remarks in Frankfurt at the ECB conference and on the US Dollar side the U.S. Building Permits will be the only notable release. Thursday the Philly Fed Manufacturing Index will affect the US Dollar and the Euro will have a light economic calendar.
Friday the Euro remains unaffected by economic data and on the US Dollar side we have the Existing Home Sales numbers; later in the day, Fed Chair Yellen will speak in Washington DC at the Herbert Stein Memorial Lecture; however, the late hour of the speech may translate into a low impact.
Last week the pair erased a good chunk of the losses incurred a week before and moved again above 1.3250. The Pound was heavily affected by Brexit negotiations and showed erratic movement in the second part of the week.
The pair has broken to the upside the 50 days EMA and the important level at 1.3250. These are bullish signs but as we saw last week, the Pound is very vulnerable to Brexit talks and rumors, so the technical side will be overshadowed if this week we will get more Brexit news.
Strictly from a technical standpoint, the last Daily candle is showing a long wick in its upper part, which is a sign of rejection, so we may see a move below 1.3250 but as long as price is trading above the 50 days EMA, the bias is slightly bullish.
The first important day of the week ahead will be Tuesday when Bank of England Governor Mark Carney will testify before the Treasury Select Committee. The same day the British Consumer Price Index will be released, showing changes in the price that consumers pay for the goods and services they purchase; this is the main gauge of inflation and has a high impact on the currency, so we expect to see strong movement.
Wednesday the Average Earnings Index will show changes in the price that employers pay for labor and the last major release of the week is scheduled Thursday: the British Retail Sales, which account for the major part of consumer spending. Overall it’s a busy week for the Pound and this will probably trigger high volatility.
Written by: Bogdan Giulvezan