EUR/USD FUNDAMENTALS AND TECHNICAL
Pair closed last week’s trading session marginally lower while sea-sawing once again during the week’s trading session. An initial downside move at the middle of the week was due to better than expected ADP employment and hawkish FOMC minutes, signalling faster tapering and tightening of policy, including a balance sheet reduction. By the end of the week, pair retreated higher as the non farm payroll number disappointed investors.
As for this week market participants will focus on the surge in corona virus cases with hospitalization pressuring the national health systems in both the US and the EU. Many central bank’s officials will speak during the week and must be well listen what they have to say as both banks are ready to normalize their policy. All eyes on the inflation numbers for both the US and EU. As the persisting inflation in EU continue to be steady around 2.6%, this might force ECB to move into fiscal normalization faster than expected. Such a move will waive the current divergence between the two central banks and will help the pair recover more lost ground.
On the economic calendar we have on Tuesday, the speech from FED’s chair Jerome Powell. On Wednesday, European industrial production expected lower at 0.3% US consumer price index expected higher at 5.4% On Thursday, US producer price index higher at 8% On Friday, US retail sales to remain unchanged at 0.3% and Michigan consumer sentiment also unchanged at 70.6
Technically, the picture is negative, as pair continues to trade below 38.2%. If pair continues to trade on the downside this week and breaks and closes below 1.1300 (23.6%), will accelerate losses down to 1.1200 Alternative if pair trades on the upside, a close above (38.2%) will change the picture back to neutral and open the road to 1.1450. Our traders are on a wait and see mode. We are expending short sellers to appear above 1.1435 targeting profits at 1.1200 and bulls to appear below 1.1300 targeting profit at 1.1450
GBP/USD FUNDAMENTALS AND TECHNICAL
Pair closed last week’s trading session higher due to the disappointing non-farm payroll. The hawkish FOMC minutes last Wednesday was overshadowed by the worse than expected non-farm payroll number and this benefit the pair to close higher on the week. The UK government’s stance on not adding any new restrictions and PM Jonson ‘s comments, that Britons will need to learn how to live with corona virus was taken as positive from market participants and kept the GBP stronger.
As for this week traders will be focus on the daily surge in covid new cases and hospitalizations. The more the increase the more the pressure on both central banks to keep their policy unchanged. On the other hand, the persisting inflation number might overshadow covid infections and force the central banks into faster monetary normalization. With not any scheduled BOE officials’ speeches this week, traders will be following the speech of FED’s Powell in gathering clues about the future path of FED.
In the economic calendar we have on Tuesday, BRC Like-for-Like retail sales pointing lower at 0.3% On Tuesday, NIESER GDP expected the same at 0.9% On Wednesday, US consumer price index expected higher at 5.4% On Thursday, US producer price index higher at 8% On Friday, UK gross domestic product expected higher at 0.4% UK manufacturing production higher at 0.2% US retail sales to remain unchanged at 0.3% and Michigan consumer sentiment also unchanged at 70.6
Technically the pair is positive after last week’s break and closed above 61.8%. In this week’s trading session if pair continues on the upside, we are expecting to test 1.3700, alternatively, if resumes downside and close below (61.8%), will change the picture back to neutral and open the road down to 1.3500 Our traders maintaining a neutral stance for now. We are expecting short sellers to appear above 1.3600 targeting profits at 1.3300 and bulls to appear below 1.3400 targeting profits at 1.3600
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