EURUSD closed the week lower after FED disappointed investors by cutting rates by only 0.25%. This was widely expected as we mention in our previous weekly comments. The market was pricing in a 0.50% rate cut and this rate cut was waived during last month after better than expected economic indicators confirmed that the US economy is still improving. Another reason behind FED’s hawkish decision was the ECB’s hawkish decision from the week before. FED’s hawkish stance last week helped the US dollar to strengthen but did not last for long. US President Trump, tweeted on Thursday a decision of adding another 10% tariffs on Chinese goods. This caught Markets by surprise as the announcement came only a few days after US and Chinese officials met in order to bring a trade deal between the countries. US Dollar immediately dropped on the news and the pair recovered some lost ground.
This week’s economic calendar is very light, we have on Monday the European Markit PMI with expectations to remain unchanged at 51.4 and the US ISM Non- manufacturing PMI with expectations pointing higher at 55.5 On Tuesday, German factory orders expected higher by 0.5%. On Wednesday, German industrial production expected lower by -0.5%.
Technical, the picture is negative after it broke below 1.1100 This critical level is now opening the door for further losses. Although, Friday’s sharp turn on the upside is keeping traders on hold. If this is a reversal, and breaks and close above 1.1100, the pair may continue to trade higher this week and retest 1.1225. Alternatively if it fails to break and close above 1.1100 trades will need to trigger their stop-losses at 1.1040 Our traders keeping open their positions at 1.1287 and 1.1225 and 1.1124 targeting profits at 1.1400.
GBPUSD continues trading lower than last week as markets are still pricing in uncertainty produced by no deal departure of the UK out of the EU. Apart from the political uncertainty that surrounds GBP the price was pushed even further on the downside, thanks to the US dollar strength. BOE stabilized the situation somehow last week after avoiding to say about rate cut. BOE maintained a wait to see stance and reiterated the worries and warnings of a potential no deal exit. On the other hand, PM Boris Johnson expressed his hopes for a deal between UK and Europe, but still keeping its hard Brexit stance that if a deal will not be achieved by October, his duty is to deliver Brexit on the deadline.
In this week’s economic calendar, we have on Monday, Markit services PMI with expectations to remain unchanged at 50.2 and on Friday, Gross domestic product with expectations pointing lower at 1.4% and Manufacturing production pointing lower at -1.1%
Technically the pair is negative and continues trades in lower lows every week. The price is approaching a very strong support of 1.200 if the pair keeps that support, we may have a retrace on the upside in the coming weeks. Alternatively, if it breaks and closes below 1.200 then the pair will relocate into level never seen before. Technical, pair relocations into new level are taken 100 by 100 pips. We are expecting a break below 1.2000 to bring the pair down to 1.1900 as first level. Our traders are waiting for a retest of the strong support of 1.2000 before they decide on opening new positions.
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