EURUSD Closed the week marginally higher after Christine Lagarde the new ECB chairwoman maintained a softer tone than it was expected on her first speech. Christine Lagarde avoided to mention any new Stimulus for Europe even though she said that Europe’s slower growth and deteriorating economic indicators are due to external factors that forced the ECB to adjust to the new challenges. She also mentioned that Europe’s growth is still 2% above the 2008 crisis and she warrant that ECB’s current policy stance will not disappear. The lower than expected US nonfarm payroll last Friday helped the pair to closed relatively higher than the previous week.
In this week’s economic calendar, we have on Monday, German trade balance showing that it shrank to 17.5Billion Euros. On Wednesday, the US producer price index is pointing higher at 2.2%. On Thursday, German Harmonized index of consumer prices expected to remain unchanged at 1%, later the ECB will release the September minutes and their interest rate decision where markets are pricing in a rate cut of 10 basis point at this meeting. Later in the US consumer price index expected higher at 2.3%. On Friday, US retail sales expected higher by 0.3%
Technically, the picture is still negative, although pair reverse higher on the trend line as we expected and mentioned last week, still did not manage to hold above the old support at 1.1045 and this is keeping the pair under pressure. A retest of the new support at 1.0955 is on the table this week, a break below this level will push the pair lower at 1.0900 as first level. Alternatively a break above 1.1045 will increase possibilities of farther recovery and maybe testing the 1.1140 level.
GBPUSD traded higher last week and over performed all major pairs. Markets welcome the news over parliament’s decision of blocking a no deal Brexit. PM Boris Johnson was defeated twice last week in series of voting in the parliament. First the blocking of a no deal Brexit voted with a majority that include some of Johnson’s senior members. And second a legislation of extending the Brexit deadline for another 3 months if Johnson fails to deliver a trade deal that will be approved by parliament by 31st October. As for this week parliament will be voting on a debate whether a new general election can take place on 14th October. Two-thirds of the MPs must vote in order to bring the UK into the 3rd election in 4 years.
On this week’s economic calendar, we have on Monday, manufacturing production pointing lower by -1%. On Tuesday, average earnings expected lower at 3.8% and ILO unemployment steady at 3.9%.
Technically the pair is neutral. 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 1.2200. If positions will take profit at 1.2200 we are expecting new buyers to come in at 1.2150 and 1.2000.
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