Pair closed last week’s trading session lower mainly by UD Dollar’s strength. As the deadly virus’s cases are on the rise and vaccinations are being delayed, Equity markets are selling off while investors are losing their faith in faster economic recovery. This negative sentiment is driving investors into safe-haven US Dollar. With economic indicators mixed and dovish FED comments balancing with dovish ECB comments pair remaining under pressure.
As for this week, traders will mainly focus on Friday’s nonfarm payroll and in any ECB comments on how the central bank will watch the exchange rate of the pair and once again might rise the dovish tone. Heavy economic calendar from both sides of the Atlantic is expected to shake the pair this week.
On the economic calendar we have on Monday, Retail sales pointing lower at -2.3% European Markit manufacturing PMI higher at 55.5 and US ISM manufacturing PMI lower at 59.5 On Tuesday, European gross domestic product expected lower at -1.8% On Wednesday, European Markit PMI composite to remain unchanged at 47.5 European consumer price index is expected higher at 0.4% US ADP Employment is pointing higher at 40K and US ISM service PMI lower at 56.5. On Thursday, European retail sales expected higher at 1.3% On Friday German factory orders expected lower at -1.2% US nonfarm payrolls higher at 85K and average hourly earnings lower at 5%
Technically, the picture is neutral. Pair closed below 23.6% at 1.2136 after tested support at 1.2060 (38.2%) In this week’s trading session if the pair continues on the upside and break and close above (23.6%) 1.2170, the picture will be turned to positive with next level in sight 1.2350 (0%) if pair continues on the downside will need to break and close below 1.2060 in order to change the picture to neutral negative. Our traders are keeping open their long positions at 1.2174 and 1.2060 targeting profits at 1.2350. If the pair continues on the upside, we are expecting buyers to trigger trailing stops at 1.2200 and sellers to appear above 1.2200.
GBP/USD FUNDAMENTALS AND TECHNICALS
Pair closed unchanged last week’s trading session with the GBP facing the US Dollar’s strength. Even though the new covid cases are reducing, the deaths are still rising even after vaccination is underway and in line with the Government’s program. The most obvious reason behind GBP holding strong is the strong recovery in UK equity markets.
As for this week, traders will focus on the BOE meeting. Even though BOE is expected to keep unchanged monetary policy in this meeting is still advanceable to follow the releases from the MPC and get a clearer picture of how the UK economy is performing. Recent arguments between the UK’s AstraZeneca and EU, regarding vaccines distribution may have a negative impact on the trade relations between the 2 sides and this could weight on GBP strength
In the economic calendar we have on Monday, Markit manufacturing PMI to remain unchanged at 52.9 On Thursday, BOE minutes will be released and a speech from BOE governor Baily will follow
Technically the pair is positive after last week’s upside move and close just above 0% at 1.3698. In this week’s trading session, if the pair continues on the upside, we are expecting to test 1.3750. A break above this level will target as next level 1.3800. Alternative if the pair retreats on the downside, first level to be retested is 1.3600 with first strong support of 1.3500 that will change the picture to neutral as it will change last 2-month uptrend channel. Our traders are keeping open their short positions at 1.3500 and 1.3600 adding more short positions at 1.3700 targeting profits at 1.3150. We are expecting buyers to appear below 1.3450 till 1.3150 targeting profits above 1.3700 and short sellers to continue selling on the way up or taking profits on the way down.
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