EURUSD Closed the week higher amid FED’s rate cut and weaker than expected US manufacturing PMI. Last week’s 0.25% rate cut was widely expected and priced in, although initial reaction was a stronger US dollar, immediate after FED’s Powell speech, US dollar reversed sharply on the downside as Mr. Powell highlighted that current rate cuts are sustainable and will remain lower until inflation number will significantly tick higher. Fundamentals on this pair are clearer now. With the ECB on the one side running out of options, with their bond buying program cooling off and the FED on the other side, walking into dovish momentum, the pair will continue higher for the rest of the year, unless unexpected events will appear. The new ECB chair Cristine Lagarde undertakes, and her first speech on Monday will guide investors about her intentions and how she will continue Mario Draghi’s work. Trade war fears between US and China appeared once again last week after Chinese officials expressed doubts about the current trade deal. Developments on this subject will continue to affect the rate on this pair for the rest of year.
In this week’s economic calendar, we have on Monday, German Markit manufacturing PMI with expectations to remain unchanged and US factory orders with expectations pointing lower by -0.3%. On Tuesday, US ISM non-manufacturing PMI expected higher at 53.5. On Thursday, EU economic forecast will be released. We have many FED officials speaking during the week and could be worth listening to what they have to say.
Technically, the picture is neutral as far as, trading within the trend channel. Recent upside moves and turn on the 38.2% and closing above the 50% is giving the pair a more positive outlook. A break above 61.8% this week will change the picture to positive and possible continuation of the upside move up to 1.1245 as first stop. Our traders are becoming more optimistic that pair will continue to trade higher and maintain open their long positions at 1.1088 targeting profits at 1.1200 and triggering trailing stops at 1.1145. If trailing stops hit new buy positions will open again at 1.1088 with stop losses at 1.0800. We expect more buyers to come in at 1.1011
GBPUSD closed the week higher after upper house of lords approved the general election for December 12th. Debated for candidates began already but volatility on GBP is relatively low, as for now there are no news or changes on what was agreed last week. For this week we do not expect any changes that can affect the pair. Any move on either side will be based on US dollar counterparty, on economic indicators in the UK and BOE minutes on Thursday. No change on policy is expected at this meeting, although Governor’s speech needs to be followed in order to gather information on how the bank will act after the general elections and the Brexit procedure.
On this week’s economic calendar, we have on Tuesday, BRC retail sales pointing lower by -1.4% services PMI expected higher at 49.6. On Thursday, BOE minutes will be release, and Inflation report.
Technically the pair is still neutral. Pair broke and closed above the (38.2%) 1.2860 and this is changing the picture in a more positive outlook. Traders keeping open their buy positions at 1.2869 targeting profits at 1.3374. We expect more buyers to appear at 1.2550
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