Week ahead April 30th– May 4th
There is a short week ahead because of labor day on 1st of May. Although, caution must be in place because the rest of the week is over-loaded with economic indicators including FOMC minutes and the Non-farm payroll. ECB’s minutes remained unchanged last week as it was widely expected, although Mr. Draghi’s dovish speech later produced some significant volatility for the pair. As a result to Mr. Draghi’s speech, there was a break out of the multi month range trading, registering new lows for now and a possible price relocation for the coming sessions. On Monday, harmonized index of consumer prices in Germany expected to remain unchanged at 1.5%, later the US core personal consumption expenditure expected to be higher at 1.8% compared to last month’s 1.6%. This reading will be seen as extremely positive for the USD and may push the pair even lower. On Tuesday, the US ISM manufacturing PMI is expected to be lower at 58.6 compared to last month’s 59.3. On Wednesday, European gross domestic product is expected to be lower at 2.6% compared to last quarter’s 2.7%. Later, on the same day, ADP employment is pointing at 200K, down from last month’s 241K. Finally, what investors are waiting for, the FOMC minutes will be released, without any changes expected at this meeting, it is still important for guiding investors on what plans the FED has for the remaining 8 months of 2018. At this level, EURUSD is pricing in another 2 rate hikes. A more hawkish FOMC and a possibility of another 3 rate hikes will push the pair to lower levels. On Thursday, European consumer price index is pointing higher at 1.4%, up from last reading of 1.3%. If this report is confirmed, it may push EURO higher and recover some lost ground. On Friday, the non-farm payroll is expected to add 198K new jobs, substantially higher than last month’s 103K, helping USD to maintain is strength.
Technically, EURUSD is neutral to negative and due to last week’s break out we will keep a neutral stance. For this week, the plan is to wait-to-see, without opening any positions.
GBP bulls were disappointed last week due to a softer than expected GDP. For the coming week, the GBPUSD pair is in the hands of USD’s heavy calendar as mentioned above. For the UK economy will have only market manufacturing PMI on Tuesday as well as the construction PMI on Wednesday.
Technically, we maintain a neutral to bullish stance. We keep open position buys at 1.4158, take profit 1.4300, and trailing stops above 1.4245. Secondly, buy positions can be opened at 1.3995, take profit 1.4200, and trailing stop above 1.4158. A third buy order can be placed at 1.3700, and take profit 1.4000, with trailing stop above 1.3900. On the above opened positions, they must trigger stop losses at 1.3600, just in case the pair will break out of the multi-month uptrend channel. It’s always better to stop loss positions in such break outs until the price finds new levels.
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