A luke-warm hawkish tone was taken by the FED during the FOMC meeting held last Wednesday. Without any significant changes, as it was widely expected, the FED failed to deliver what markets were hoping to hear and this halted the dollar’s rally. Above that, a disappointing non-farm payrolls result kept the dollar sleeping last week. It is too early to say now that the rally is over as we may have some verbal interventions this week from fed officials during their speeches. On Monday, the US and UK markets are closed due to early May’s holiday, so nothing important is expected to happen during this period. On Tuesday, governor Powell speaks, a well-known hawkish member will bring some volatility. On Wednesday, the US PPI is expected to point at 2.8%, down from the last at 3%, and this will bring the USD some down-side pressure. On Thursday, Europe’s biggest economies are celebrating their Ascension day. Later during the day, the US initial jobless claims is expected to rise, US CPI-core is expected to remain unchanged at 0.2% m/m, and with an increase on y/y of 2.5% compare to last report of 2.4%, this may give a new wave of strength to the USD. On Friday, the Michigan University sentiment is pointing marginally lower at 98.3 down from last reading of 98.8.
Technical analysis suggest that EURUSD is neutral to negative, and we will keep a neutral trading stance for now. Until we have a clearer picture of the rate, we will avoid opening any new positions. At this point 1.1960-1.2000 is standing at an old, very strong resistance, acting now as support. A break below this level will push rate lower to 1.16. If it fails to break, a recovery may take place and the rate will continue higher and range between 1.20-1.22
GBP is primed and is preparing for a big break on the downside or big recovery on the upside. As we previously discussed, the drop was mainly due to a dovish declaration from BOE’s governor Carney. The chance to move GBP in any significant direction will be this week. On Thursday, the BOE will issue their monetary policy and investors and traders around the world will mainly focus on the voting of the MPs, and Governor Carney’s speech. At the last meeting we had a 7 unchanged versus 2 hikes. Any change on this number will bring significant volatility to the pair. 6v3 will push the pair higher and 8v1 will push it sharp lower.
Technically, we maintain a neutral stance. A wait-to-see stance is the most reliable undertaking for now.
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