EURUSD Closed the week lower due to US dollar’s strength over optimism of partial tariff rollover agreed by US and Chinese officials during their meeting last week. Optimism over trade war ending pushed equity markets on new highs and bond yields lower. This helped the US dollar to significantly become stronger over all its major counterparties. Although before the closing bell on Friday Trump declared that he never agreed to rolling over tariffs, this was a proposal from china that remains to be discussed this week in the US and sign a final agreement. On the other hand, EU cuts growth forecast for euro zone and expressing warries on global trade tensions. Trade worries and uncertainty is not only on global scale but also in the future trade relation between UK and EU. All above mentioned resulted to cut eurozone growth from 1.2% to 1.1% for 2020. This added downside pressure on the pair. This week all eyes will be on US China agreement and FED’s officials’ speeches.
On this week’s economic calendar, we have on Tuesday, Eurozone ZEW survey pointing lower at -32.5 and German ZEW economic sentiment lower at -17.9. On Wednesday, German Harmonized index of consumer prices expected to remain unchanged at 0.9%. US consumer price index expected to remain unchanged at 1.7%. On Thursday, German Gross domestic product is pointing lower by -0.1%, European Gross domestic product expected to remain unchanged at 1.1% and the US producer price index lower at 1.6%. On Friday, European consumer price index to remain unchanged at 1.1% and US retail sales are pointing higher by 0.3%
Technically, the picture is neutral. Last week’s rally was halted just below 61.8% 1.1172 and turned lower to stop at 23.6% 1.1020. For this week a break below 23.6% can push the pair to retest 1.0900 (0%) alternatively, a rejection of 23.6% could resume upside move and first stop to be at 38.2% 1.1088 New buy positions opened at 1.1088 and 1.1020 targeting profits at 1.1214 with stop losses at 1.0800. We expect more aggressive buyers to come in at 1.0900
GBPUSD closed the week lower after unexpectedly 2 out of 9 MPs voted for a rate cut on last week’s BOE meeting. Both MPs and BOE governor Carney expressed worries over Brexit outcome that will follow the December 12 elections and they comment that rate cut proposed by the 2 MPs was sustainable for the current situation. Another reason behind last week’s downside move on this pair is mentioned above in our EURUSD commentary and it was due to US dollar’s strength over trade deal optimism. As for this week the trade deal between US and China will dominate the markets.
On this week’s economic calendar, we have on Monday Manufacturing production pointing lower by -0.2% and gross domestic product higher by 0.3%. On Tuesday, ILO unemployment rate expected to remain unchanged at 3.9% and average earnings unchanged at 3.8%. On Wednesday, consumer price index to remain unchanged at 1.7%, producer price index lowers at -1.8% and retail price index lower by -0.1%. On Thursday, retail sales expected to be higher at 3.7%
Technically the pair is still neutral. Pair broke and closed below the (38.2%) 1.2860 and this is changing the picture from positive to neutral. Traders keeping open their buy positions at 1.2869 targeting profits at 1.3374. We expect more buyers to appear at 1.2550 (22.6%)
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