Week ahead March 12th – 16th

Euro

Italian voting finally digested by markets and did not bring any significant volatility for Euro. ECB was the main reason for last week’s volatility due to Thursday’s meeting. Policy makers decided to keep an option to extend the QE program further after September, when bond buying is currently scheduled to expire. Markets interpreted the message as dovish as Draghi elaborated on the risks to the outlook in his press conference with the Euro falling 0.8 percent. ECB shows that it’s preparing to reign in the assistance for growth. In new forecasts, the bank kept the outlook for expansion largely unchanged for the next three years. It expects inflation to pick up to an average of 1.7 percent in 2020, which still undershoots the target of just below 2 percent.

A light economic calendar lies ahead with only 2 major announcements to keep an eye on. On Wednesday the 14th, German Harmonised index of consumer prices is expected to remain unchanged at 1.2% and on Friday the 16th, European consumer price index also expected to be unchanged at 1.2%

Fundamentally, the EUR/USD pair may trade somehow lower due to the ECB stance and due to the next week’s FOMC meeting that is more than likely to proceed with an announcement of a rate hike of 0.25%. Even though a 0.25% rate hike is fully priced in at current level of 1.2300, we need to be cautious of a temporary downside move according to what the new FED chairman will say in his first press conference next week. 

On a technical point of view, we maintain our bullish stance and we start once again to buy into dips. First buy order will be placed at 1.2215, take profit 1.2400, trailing stop above 1.2300. Strong buy at 1.2151, take profit 1.2400, trailing stop above 1.2300.

 

GBP

Europe rejected the trade demands last week of PM Theresa May, and this pushed the GBP lower. The only drivers to look for this week will be the declarations from both sides, European’s and UK’s negotiators. As for the economic calendar there is nothing to follow. This week’s volatility on GBP/USD exchange rate will be in the fate of USD. The downside from current levels of 1.3850 may be on the cards as we approach next week’s FOMC.

Technical GBP/USD is still bullish and we maintain our trading style to buy into dips. We keep open the long position from last week at 1.3800, take profit 1.4000, trailing stop above 1.3900. Next buy order is standing at 1.3665, take profit 1.4000, trailing stop above 1.3800