Pair closed last week’s trading session higher on disappointing nonfarm payroll number. The US Dollar continues sliding over the Friday session when US President Biden comments on the nonfarm payroll number, saying that the weak number shows that the US economy needs more funding and more support to sustained growth.
As for this week, and the coming months to be more accurate, traders must focus on FED’s comments and FED’s Officials’ speeches. Last week’s comments must be taken more serious by traders. The fed said that “ A rising appetite for risk across a variety of asset markets is stretching valuations and creating vulnerabilities in the U.S. financial system” The central bank also warned that “Vulnerabilities associated with elevated risk appetite are rising, The combination of stretched valuations with very high levels of corporate indebtedness bear watching because of the potential to amplify the effects of a re-pricing event, In this environment, prices may be vulnerable to significant declines should risk appetite fall” All the above mentioned are signalling a sharp decline in the equity markets, meaning, investors will run into save heaven US Dollar and potentially a rate hike sooner than expected will also boost demand for US Dollar
On the economic calendar, we have on Tuesday, European ZEW Survey economic sentiment pointing higher at 71.2 and German ZEW survey economic sentiment higher at 71. On Wednesday, German Harmonized index of consumer prices to remain unchanged at 2.1% US consumer price index expected higher at 2.3% On Friday, US retail sales expected lower at 1% and Michigan consumer sentiment higher at 89.5
Technically, the picture is positive. Pair closed just below 23.6% at 1.2162 and this keeps a positive bias for the pair. In this week’s trading session if the pair continues on the upside, we are expecting to test the next resistance of 1.2240 If the pair resumes downside and close below 38.2% will change the picture back to neutral with the next level in focus the 1.1973 (50%). Our traders start selling the pair at 1.2169 targeting profits at 1.1973 we are expecting more aggressive sellers at 1.2240 Alternatively if the pair resumes downside buyers will appear around 1.2000 targeting profits at 1.2170
GBP/USD FUNDAMENTALS AND TECHNICALS
Pair closed last week’s trading session higher on disappointing non-farm payroll number in the US. As we mentioned in our EURUSD report above apart from nonfarm payroll number comments from US president Biden nave taken negative for the US Dollar and this help the GBPUSD pair closed higher. On the GBP side, we had a hawkish BOE last week announcing that they will slow their bond purchase program. The BOE upgraded its economic forecast at 7.5% for 2021 and this was taken as positive for GBE pushing the pair even higher.
As for this week, traders will have to confront an old nightmare the BREXIT aftershock events. With Scotland into elections this weekend all eyes will be turned to the result. If a pro-independence party gain a majority, it could raise tensions with London. However, once the vote ends, a dose of uncertainty disappears. Moreover, if the Scottish National Party (SNP) has a disappointing night, the pound could extend its gains. Many speeches from BOE Governor Bailey are worth to be followed as the central bank might be signal a rate hike in the coming months, as the economy recovers faster than expected.
In the economic calendar, we have on Tuesday, BRC Like-for-Like retail sales pointing lower at 14.8%. On Wednesday, Manufacturing production expected lower at 1% Gross domestic product lower at 0.5% and NIESER GDP estimate lower at -1.8%
Technically the pair is neutral after closing just below (23.6%) at 1.3983. In this week’s trading session if the pair trades on the upside and close above 1.4000 (23.6%) the picture will turn positive with the next level to be tested 1.4250 (0%) Alternative if the pair resumes the downside the first level to be retested is 1.3841 (38.2%). Our traders took profit from their long positions and now waiting for a pullback around 1.3841 to start buying the pair again. We are expecting short sellers to appear above 1.4100 with more aggressive short positions at 1.4250 targeting profits at 1.4000
For more detailed economic calendar events please visit our live economic calendar on:
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