EURUSD Closed the week higher, benefiting from many key fundamentals. ECB maintain policy unchanged, even though ECB Chair Christine Lagarde expressed worries of a slowdown in the EU economy due to outside factors, the Euro remained firm higher as her worry comments were overshadowed by her speech highlighting that current policy must be reviewed and reevaluated regardless if it has positive impact or not, comments were taken as hawkish from traders and helped the Euro trade higher. Another key behind the rally was the UK voting outcome. As Boris Johnson won the majority in the parliament this gave some relief to the markets that finally Brexit will be executed most probably on the deadline with a trade deal on the table. Later on, Friday, Positive news from US-China trade deal pushed equity markets higher and benefited the US Dollar, a reason that halts pair’s rally from keep trading higher. This week traders will mainly focus on US-China trade deal to see if it will finally be signed or not. As far as we know, president Trump announced that there will not be new tariffs on Chinese imports as it was originally scheduled for Sunday 15th December. Although signing the deal is not yet a done deal as far as US keeps the already applied 25% tariffs on 250 Billion dollars of Chinese products.
On this week’s economic calendar, we have on Monday, German Markit manufacturing PMI pointing higher at 44.5, German Markit PMI composite also higher at 49.9, European Markit PMI composite higher at 50.9 and US Markit manufacturing PMI marginally lower at 52.4. On Wednesday German producer price index to keep declining by -0.2%, German IFO business climate expected positive at 95.5, European consumer price index core to remain stable at 1.3%. On Friday, German Gfk Consumer confidence survey to remain unchanged at 9.7, US Gross domestic product unchanged at 2.1%, core personal consumption expenditure unchanged at 0.1% and Michigan consumer sentiment to be lower at 97
Technically, the picture is neutral to positive after last week’s trading session managed to close above 38.2% 1.1088. The overall picture is neutral for now as pair retreated lower exactly on the multi month trend line. For this week’s trading session if the pair resumes its rally and closes above 61.8%, this could change the picture to positive and opens the road to 1.1418. Alternative a close below 38.2% will add pressure on pair and retreat to 1.1020 levels. Our Traders took profit all their buy positions at 1.1214 as it was targeted and now placing new buy orders at 1.1088 More aggressive buyers expected to appear at 1.1020 targeting profits above 1.1214
GBPUSD closed the week higher after Prime Minister Boris Johnson’s Conservative Party won a majority in the U.K. general election, with 364 seats raising hopes that an end to the Brexit deadlock will unlock pending investment flows. With the Withdrawal Agreement expected to pass, focus will soon shift towards the transition period which is due to expire at the end of 2020. Boris Johnson has previously stated that he would not ask the EU for an extension to the transition period making for a tight schedule for the UK and EU to agree an FTA (average time taken for a trade deal is 4yrs), which in turn keeps the risk of a no-deal Brexit on the table. However, given Boris Johnson’s sizeable majority he may feel less pressure to maintain his rhetoric that he will not extend the transition period. The election outcome is likely to see a reduction in political uncertainty that has stifled the UK economic activity since the EU referendum, thus potentially prompting the Bank of England to shift towards a more neutral stance. That said, this will also be predicated on a notable improvement in UK data, particularly that of the jobs markets as well as a consistent rise in business investment going forward. As from now on, as the Brexit uncertainty has been waived somehow, we are expecting the pair to move only by economic indicators outcome.
On this week’s economic calendar, we have on Monday, Markit Service PMI pointing higher at 49.6 and financial stability to be released. On Tuesday, ILO Unemployment expected higher at 3.9% and average earnings lower at 3.4%. On Wednesday, consumer price index to remain unchanged at 1.5% and producer price index lower at -4.9%. On Thursday, Bank of England will release their interest rate decision and expected to remain unchanged at 0.75% followed by a press conference. On Friday Gross domestic product expected to remain unchanged at 0.3%
Technically the pair is positive. Pair broke above (61.8%) 1.3390, even though a minor correction on the downside took place by the end of the week and the pair closes below 61.8%, this will not change the picture from staying positive. Pair entered into an overbought territory and this could bring some correction in the coming sessions. A close below 1.3140 this week is needed in order to bring the pair back to neutral. Alternative a break and close above 61.8% will open the road for 1.4200 Traders took profit their buy positions at 1.3374 We expect new buyers to start buying the dips at 1.3245 and 1.3210
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