EURUSD picture unexpectedly change from neutral to negative even after ECB announced the end of its 1.5 trillion bond purchase program, known as QE, and reduce it’s inflation target from 1.8% to 1.7%. The speech of Mario Draghi was taken as dovish after he mention that: “incoming information has been weaker than expected, reflecting softer external demand but also some country and sector-specific factors, the underlying strength of domestic demand continues to underpin the euro area expansion and gradually rising inflation pressures. This supports our confidence that the sustained convergence of inflation to our aim will proceed and will be maintained even after the end of our net asset purchases. At the same time, uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent”
Apart from the dovish ECB, the US CPI came out positive and this refresh the signal that FED may increase interest rates on their next FOMC meeting due this week on Wednesday. If FED will not increase rates on this meeting and the press conference that will follow, will signal softer policy adjustment in 2019, this might change the pair’s picture from negative to neutral once again.
On the economic calendar for this week we have on Monday, European CPI with expectation unchanged to 2%, On Tuesday, German IFO business climate expected lower at 101.7. On Wednesday FOMC minutes with expectations of a new interest rate hike of 0.25%. On Friday the US Gross domestic product expected unchanged at 3.5% durable goods orders 1.2% revised form latest negative -4.4% and Core personal consumption expenditures at 1.5%.
Technical, after last week’s break below 1.1285 the picture turned into negative. Although, our traders maintain Buy positions 1.1500, 1.1320 and 1.1220 targeting profits around 1.1500. Pair is expected to continue range between the 0% Fibonacci level at 1.1220 and 1.1500 (50%) Fibonacci level. A break and close above 1.1430 on the 4H chart needed to change the picture to neutral/positive. Caution must be in place as the break of 0% Fibonacci (1.1220) may accelerate losses down to 1.1100. In such a case its wiser to triggers stop losses below 1.1220 and wait for the new price relocation to set new boundaries.
GBPUSD turned sharp lower last week after PM Theresa May decided to cancel parliament voting on her Brexit plan and postponed the voting for January 21st. Downside move halted the next day when an intra-party confidence vote was granted to PM Theresa May. Uncertainty remains on GBP as a new round of negotiation and new Brexit plans will be prepared in UK house of commons before they go back to Brussel and present it to EU leaders. The back and forward of PM Theresa May, forced EU leaders to lose their trust against PM Theresa May, as they declared after their Brussel Meeting last week. GBPUSD pair will remain vulnerable on any outcome at least until the 21st of January. On the economic calendar we have on Wednesday, the UK consumer price index with expectations pointing lower at 2.3%. On Thursday, UK retail sales expected lower at 1.9% and later the same day, the BOE will release their minutes. No rate hike or change in monetary policy is expected at this meeting.
Technically the pair is negative. Our traders stopped out buy positions at 1.3135, 1.3063 and 1.2930 and now waiting for a new price relocation to be set before starting again buying or selling. Technical speaking, traders may start buying the pair if price reject to break support at 1.2470 and breaks and close above 1.2645 (23.6% Fibonacci level). A break below 1.2470 may force trader to sell the pair and target profit down to 1.2200.
For more detail economic calendar events please visit our live economic calendar on:
*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 your invested capital, so please make sure that you fully understand the risks involved.