Politics is the only event that will dominate markets and FX pairs this week rather than Wednesday’s Gross Domestic Product release and ECB meeting on Thursday 8th. As it is widely expected Mr. Draghi will try again to intervene verbally on the strengthening of EURO, this is already known and price won’t have any significant change. We will continue focusing only on how the Italian negotiations and coalition formations will take place in the coming days. Exit polls shows a strong outcome for the Eurosceptic party Five Star Movement something that, if it will be confirm officially later today, will push euro lower. For this strong fundamental reason, we will maintain a neutral stance for EURO.
On a technical point of view, we maintain our positive stance BUT WE WILL NOT buy into the dips unless the official voting results and the coalition talks will give us a clear picture. For this week, we keep open the last week’s buy at 1.2350 take profit at 1.2450 trailing stop above 1.2400.
Last Friday’s speech of PM Theresa May gave a push on the upside for GBP. As we have a clearer picture at least for now on what Theresa May wants from EU, we can say that
GBP remain Neutral to Bullish. Any drop will be seen as buy opportunity. Week ahead does not offer any strong economic calendar, we will continue to focus on declarations of both EU and UK negotiators for Brexit talks.
On a technical point of view, we maintain a bullish sentiment and continue to buy into drops. We already bought at 1.3800 targeting take profit at 1.4000 trailing stop above 1.3900 must be trigger. The next strong buy order stands at 1.3600.
The Heavy economic calendar for the USD last week, gave traders many opportunities. Even though USD traded higher until Thursday late, traders were caught in surprise on Friday when USD turn lower, after President Trump proposed a 25% tax on steel and aluminum imports, stated that a trade war can be won easily. Economic calendar for USD is Heavy again for the coming week, starting on Monday Markit Service PMI is expected to remain the same at 55.5. On Tuesday and Wednesday Fed official’s speeches will be a verbally intervention and ADP employment expected to be lower at 195K from 234k. Finally, on Friday, the big number of Non-farm payrolls expected to show a decrease to 190k down from 200k. Volatility expected to be high and we focus mainly to the new TRUMP’S TRADE WAR.
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