Weekly Analysis: In the early part of last week’s trading session the US Dollar made substantial advances and reached the support at 1.1713. However, some of the greenback’s gains were erased and the pair climbed back into the 50 days Exponential Moving Average.
The pair is trapped between 1.1713 support and the 50 days Exponential Moving Average and this opens up two possible scenarios: if price moves above the 50 EMA, it will probably break through 1.1875 and head closer to 1.2000, trying to resume the uptrend. On the other hand, if the pair bounces lower at the 50 EMA, this will prove that the momentum is shifting towards the short side and will probably generate a break of 1.1713 – 1.1700 and a move closer to 1.1600. From a long term perspective the pair is still in an uptrend.
The first event of the week will be the release of the U.S. Manufacturing PMI, scheduled Monday. This is a survey that tries to gauge the opinions of purchasing managers regarding economic and business conditions in the Manufacturing sector and acts as a leading indicator of optimism, with a medium impact in the greenback.
Tuesday German banks will be closed in celebration of German Unity Day and we don’t have anything major on the US Dollar side either. Wednesday action picks up with a first look at U.S. jobs situation: the ADP Non-Farm Employment Change. The report tracks changes in the number of employed people, excluding Government and the farming industry and tries to mimic the NFP which comes out 2 days later.
Thursday is a slow economic day for both the Euro and the US Dollar and the week ends Friday with the most important U.S. employment data: the Non-Farm Payrolls (NFP). The report shows changes in the number of employed people during the previous month, excluding the farming industry and is known to be a very strong market mover. Higher numbers usually strengthen the US Dollar because higher employment usually leads to increased consumer spending.
US Dollar strength took the pair below 1.3450 support but momentum soon faded and price remained in a tight range for the rest of the week.
For the last 3 days the pair has been bouncing between 1.3350 support and 1.3450 resistance and this type of behaviour usually means that a strong breakout is in the making. From a longer term perspective the pair is in an uptrend and is trading above the 50 days Exponential Moving Average, so we favour a move up, through 1.3450. If the support at 1.3350 is broken, then the pair will likely move into the 50 days EMA and into the support at 1.3250.
The first release of the week is the British Manufacturing PMI, scheduled Monday, followed Tuesday by the Construction PMI and Wednesday by the Services PMI. These are surveys that act as leading indicators of economic health, derived from the opinions of purchasing managers from the respective sectors but are not known to be strong market movers. However, higher numbers usually strengthen the Pound.
Written by: Bogdan Giulvezan