EURUSD Closed the week higher despite dovish statement of ECB’s Mario Draghi. Although ECB cut the rates by 10bps as it was widely expected, and despite the statement of the continuation of the QE program of 20 billion per month the down side move was limited and pair retreated and closed higher as markets were expecting a more dovish ECB than this one. Market players jump into huge buying positions as they consider the current monetary policy was very well priced in at this exchange rate. Another factor that pushed the pair higher was a tweet from US president Trump saying that: “ECB is “acting quickly” while the Federal Reserve “sits, and sits, and sits.” This pushed investors to enter long on the pair as they are now bracing for a FED rate cut this week.
In this week’s economic calendar, we have on Tuesday, German ZEW survey with expectation pointing lower at -38.0 and the US industrial production pointing higher by 0.2%. On Wednesday, European consumer price index expected unchanged at 0.9%, later in the US the FOMC minutes will be released and expectations are for a rate cut of 0.25%. On Friday, German producer price index expected lower by -0.2%
Technically, the picture is neutral. Although pair continue trading higher within the trend channel still need to break and close above resistance of 1.1127 in order to change the picture to positive. The new support at 1.0955 it was clear rejected for now and pair expected to continue trading higher. We can see new buyers coming in at 1.1014 targeting profits at 1.1320
GBPUSD once again traded higher last week and over performed all major pairs for a second week in a row. Markets are still pricing in a soft Brexit with a good deal between both the UK and EU and hopes of a new Brexit deadline for another 3 months is giving investors the opportunity to buy the pair. Although caution needs to be in place as things can turn upside down due to a political chaos in the UK and the contradiction between different court’s rulings on whether the suspension of Parliament is lawful or must be cancelled. Apart from this we still have the negotiations between UK and EU, for now the hopes are just in the words and declarations from different officials, a real fact must be put down on a paper and signed by both sides before it can be considered as a solid trade agreement. Another factor that can turn things upside down is the weak inflation number, a lower inflation could trigger the language of BOE and follow the other central bank’s policy of cutting rates.
On this week’s economic calendar, we have on Wednesday, retail price index with expectations lower at 2.6% and consumer price index with expectations pointing lower at 1.9%. On Thursday, retail sales expected lower at 2.9% and later the BOE will release their minutes, no change of policy is expected at this meeting, although, as mentioned above, the statement that will follow will be focused on the inflation number and is expected to produce some volatility and guide investors into the next steps of BOE.
Technically the pair is neutral to positive. Traders expecting a continuation on the upside. Our traders hold open their buy positions at 1.2200 and 1.2000 targeting profits at 1.2800 and triggering trailing stop at 1.2450. If positions will take profit at 1.24500 we are expecting new buyers to come in at 1.2400 and 1.2300.
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