This week’s economic calendar is a light one, however, this does not mean that markets will be calm. As we are entering the week with renewed worries of a trade war between the US and Europe, market reactions could be volatile on both sides. Last week the EURUSD rejected the strong support of 1.1557, this was due mainly to the easing of political uncertainty in Italy. By the end of last week, we faced a small pullback on the pair, halting its recovery and resuming the downside momentum. This was after US President Trump imposed tariffs on European steel and aluminum, and partly because the Non-farm payrolls came out with positive results. With the G7 Summit over the weekend condemning the tariffs, and Europe warning to answer back to the US tariffs, expectations are for a decline in the dollar and pair to resume its recovery on the upside. Except from the Markit PMI’s released on Tuesday in the US and in Europe, the only main economic release for the week is the European Gross Domestic Product on Thursday, with expectations for it to remain unchanged at 2.5%.
Technical analysis for EURUSD is neutral to negative. A wait-to-see approach is the best course for now until the pair finally breaks clear the 1.1557 level. If bearish sentiment doesn’t maintain, we can confirm the reversal if the exchange rate breaks and closes above 1.1700. Buy position can be opened above 1.1700, take profit at 1.2000, if on the 4H chart the rate will close and open above 1.1700. Alternative a buy order can be placed at 1.1557, with take profit at 1.2000, trailing stop above 1.1700 as the exchange rate might retest this strong support.
With last weeks economic indicators coming out strong as mentioned above, expectation of continued recovery on this pair seem to be even stronger this week. On Monday, UK PMI construction is expected at 49.7 down from 52.5, on Tuesday Markit services PMI are expected at 52.2, down from 52.8. A light economic calendar from its US Dollar counterpart and the trade wars front and center, the pair could trade higher.
Technically the pair is neutral to bullish. Buy Order are at 1.3300, take place at 1.3500, trailing stop above 1.3415.
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