EUR/USD

Weekly Analysis: Although last week begun on a bearish note, the pair soon started to move to the upside, after a bounce near 1.0800 key support. The U.S. jobs market showed improvement and the effects are likely to be seen this week.

Technical Outlook

On a daily chart the pair moved above the 50 period Exponential Moving Average and touched the resistance at 1.1040. The moving average is not completely broken but the Stochastic and Relative Strength Index are starting to gain upside momentum, moving out of oversold territory. This suggests that we will probably see more bullish movement, possibly above 1.1100 and into 1.1200 zone. A lot will depend on ECB’s decision regarding rates so we are likely to see choppy, ranging movement until Thursday.

Fundamental Outlook

The week ahead is very slow in terms of economic releases and in fact, apart for the ECB Interest Rate announcement scheduled Thursday, there’s not much action. Monday the Eurogroup Meetings take place, followed Tuesday by the ECOFIN Meetings but usually these meetings are closed to the press so volatility will increase only if some participants talk to journalists during the day. Once the meetings have concluded, formal statements will be released.

Wednesday is a slow day for both the Euro and the US Dollar and Thursday will probably be the most important day of the week as the European Central Bank will announce the Interest Rate and ECB President Mario Draghi will hold a press conference which is known to create a lot of movement on Euro-pairs, especially during the questions-and-answers session. The interest rate is not expected to change but the deposit rate might go further into negative territory. How this will affect the Euro remains to be seen but it could generate huge movement so extra caution is recommended.

The only notable indicator released Friday is the German Final version of the Consumer Price Index but this is the third and last version in the series and usually doesn’t create strong movement.

GBP/USD

The pair had a completely bullish week, creating a low at 1.3835 and bouncing strongly from there. The British economic data released throughout the week was rather disappointing, suggesting that the climb was generated by technical reasons.

Technical Outlook

The current bullish move shows good momentum and is likely to extend into the resistance zone created by the 50 period Exponential Moving Average and the level at 1.4350. When two or more technical indicators are in close vicinity of one another (in this case the moving average and 1.4350), a confluence zone is formed and usually these zones are tough to break; considering this, we expect price to bounce lower once the said zone is reached. A potential break of the confluence zone will open the door for a move into the zone near 1.4565. Currently the main trend is still bearish.

Fundamental Outlook

Similar to the Euro and the US Dollar, the Pound has a lackluster week ahead, but an important event takes place Tuesday: Bank of England Governor Mark Carney will testify before the Parliamentary Committee with the topic being United Kingdom’s European Union membership. This speech is expected to create strong and maybe irregular moves on Pound related pairs. Caution is recommended!

The British Manufacturing Production is scheduled for release Wednesday. The indicator tracks changes in the overall volume produced by the Manufacturing sector, with better numbers showing increased economic activity and possibly a stronger Pound. Other than this, Friday the British Trade Balance comes out, showing the difference between imported and exported goods. The indicator usually creates only mild movement but if the actual value differs substantially from analysts’ forecast, volatility is likely to increase.

Written by: Bogdan Giulvezan