As we mention last week on our weekly preview, many FED officials were schedule to speak. From all of them, only one was able to change the game for the Dollar. Fed’s Ms. Brainard, known until last week as the most dovish member, has change to a hawkish member after she mentioned last week that: “cyclical pressures” – implying a pickup in the pace of inflation – and warned that they would amplified by expansionary fiscal policy. She also cited stretched asset prices and business leverage levels, urging against complacency in the face of growing vulnerabilities” This was more than enough to push the US dollar higher and continue its recovery, which started a week ago. Another reason behind last week’s recovery was the geopolitical situation cooling down. Despite the calming political storm traders must always be on our alert list for any possible escalation that will reflect once again in a dollar melt down. For the week ahead we have a heavy economic calendar: starting on Monday 23rd, German Market Sevices PMI is expected to point lower at 55 compared to the last reading of 55.1, Europe’s Market Services PMI is expected to be unchanged at 55.6, Tuesday 24th, IFO Business climate is expected to be much lower at 104 compared to last months 114.7. Finally on Thursday 26th, ECB meeting expected to bring some volatility but is not expected to come with any surprising and market moving news. Dollar’s calendar reads as follows: Monday 23rd, US Market service PMI is expected at 55.3 down 0.1 from last reading, existing home sales unchanged at 5.55M, on Tuesday 24th, S&P/case-Shiller is pointing lower at 6.2%. Finally on Friday 27th, Gross Domestic Product is pointing much lower at 2.3% compared to last report of 2.9% and Core personal consumption is also to be lower at 1.5% compared to the last reading of 1.9%.
Technical analysis puts EURUSD in range trading and in danger of a break out. As all our old positions cleared last week, this week we may need to add some changes in our trading style for now. We maintain our trading style to buy into dips, but in the same time in order to avoid the unlikely event of downside break out we will use stop losses. First buy order is at 1.2237, take profit 1.2400, trailing stop above 1.2350, stop loss at 1.2152. In the event that a triangle breaks out and closes the trading day below 1.2180, the pair may face a price retracement down to the 1.2000 area. In such events that we hit stop loss due to price retracement, a trading cease is recommended until a better picture is established.
Sharp downside move?
Should we be afraid?
What happened last week is not something new, because we should always remember that EUROPE and UK are in a negotiation and a transition period, and any agreement or lack thereof between them will affect the GBPUSD pair. This time the Irish boarder was back into discussion and some disagreements on the matter pushed GBP sharply lower. Apart from that, we had a surprise declaration from BOE Governor Carney, declaring that a rate hike is not agreed upon, at least for next BOE meeting. Both above mentioned factors play negatively for GBP and the result was last week’s sharp downside move. Economic calendar for the UK economy is very light with only one event on Friday the 27th, with Gross Domestic Product expected to remain unchanged. The pair is in the hands of the US dollar and Brexit negotiations once again.
Technically, we maintain a bullish stance and continue to buy into dips. We keep open position buys at 1.4158, take profit 1.4300, and trailing stops above 1.4245. Second tier, we look for buy orders at 1.3995, take profit 1.4200, and trailing stopd above 1.4158.
*The material does not contain an offer of, or solicitation for, a transaction in any financial instruments. 10TradeFX accepts no responsibility for any use that may be made of these comments and for any consequences resulting in it. No representationor warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losing all of your invested capital, so please make sure that you fully understand the risks involved.
10TradeFX is a trade name of Holiway Investments LTD(hereinafter the "Company”) is a registered Cypriot Investment Firm authorised and regulated by the Cyprus Securities and Exchange Commission (hereinafter the "CySEC”) with license no. 248/14. "Contract for Differences” (CFDs) are usually leveraged products. Trading Over-The-Counter (OTC) CFDs related to commodities, Forex, Indices and Shares, carries a high level of risk and can result in the loss of all of your investment.