EUR/USD

Weekly Analysis: Although the pair showed big swings during the week, it ended the period almost where it started it, showing rejection at the bullish trend line. The Fed kept rates unchanged as expected but mentioned that 2 hikes may come until the end of the year.

Technical Outlook

A massive drop was completely reversed last week and the pair moved above and below the 50 period Exponential Moving Average, bouncing at the bullish trend line. This shows that the market is in a state of indecision, probably generated by the approaching of the Brexit referendum. We recommend caution throughout the week because we expect irregular movement and alternating volatility. The latest movement shows bullish pressure so if the buyers can take price above the 50 EMA, we expect a move into 1.1400; on the other hand, a break of the trend line will open the door for a move into 1.1060.

Fundamental Outlook

Monday doesn’t hold major events but Tuesday action picks up with the release of the German ZEW Economic Sentiment, a survey of 275 German investors and professional analysts regarding the state of the economy. The same day, Fed Chair Janet Yellen will testify before the Senate Banking Committee with the main topic being monetary policy; Wednesday she will again testify on the same topic but this time before the House Financial Services Committee. Both these events have the capability to trigger erratic movement so caution is recommended.

Thursday we focus on the US Dollar for the release of the New Home Sales numbers and Friday we have the German IFO Business Climate (a survey of about 7,000 businesses regarding business conditions), followed later in the day by the U.S. Durable Goods Orders. This indicator tracks changes in the total value of orders for goods with a life expectancy of more than 3 years and usually a higher value shows increased economic activity and tends to strengthen the greenback.

GBP/USD

The Pound was heavily affected last week by the shooting of Jo Cox, a British lawmaker who had a pro-EU stance and the pair finished the week higher after an initial move below support.

Technical Outlook

We saw a strong whipsaw last week, which confirms the fact that price action is heavily influenced by the shaky fundamental environment. Price is approaching the 50 period Exponential Moving Average and this is a good place for downside movement to resume but a break will probably take the pair into 1.4500 psychological resistance. To the downside, 1.4050 remains a key support but our stance is neutral, considering the nearing of the referendum.

Fundamental Outlook

A huge event takes place this week: the referendum that will decide whether Britain will remain or not in the European Union. It is scheduled for Thursday and is expected to create huge movement and irregular volatility. We recommend choosing other pairs to trade on until things calm down. Other than this, there are no major events on the Pound’s calendar.

Written by: Bogdan Giulvezan