EURUSD traded higher last week after the FED’s decision of downgrading economic growth and inflation forecasts and confirmed that it will stop bond sales after September and taper its sales before this date. This ending earlier than the balance sheet reduction program gave the market another dovish signal, pushing US Treasury yields lower. For the first time since the 2008 recession, short term yields compared to long term yields became negative. This is the first solid recession signal in the last 10 years, putting the U.S. Dollar in trouble. The pair’s rally halted by the end of the week after Europe’s economic indicators came out worse than expected and the disappointing outcome from Brussel, not giving to the UK the delay requested for withdrawing from E.U.
On this week’s economic calendar, we have on Monday, German IFO business climate and IFO expectations, both pointing higher. On Tuesday, GFK Consumer confidence is expected to be unchanged. On Wednesday, ECB’s president Mario Draghi and many other officials are due to speak. On Thursday, US gross domestic is product expected lower at 2.4% and the German Harmonized index of consumer prices expected to be lower at 1.6%. On Friday, German import prices are expected lower at -0.5% and French consumer price index lower at 1.5%. In the US, core personal consumption is expected at 1.9% and Michigan consumer sentiment at 97.8.
Technical, the picture is neutral. Our traders keeping open their buy position at 1.1500 targeting profits around 1.1565. As for the positions of 1.1400 1.1352 and 1.1220, were taken profits off the table using trailing stops as we mentioned last week. As for this week we are changing our Fibonacci levels drawing new levels between 1.1569 and 1.1184. We are expecting new buyers this week to come back with new buy positions starting at 1.1275 (23.6% Fibonacci) and 1.1184 (0.00% Fibonacci). Alternative, if pair continue trading upwards traders might use a different trading technic, buying the break out at 1.1332 (38.2% Fibonacci).
GBPUSD traded marginally lower last week after MP Theresa May almost succeeded in obtaining something from Brussels. The EU are doing their best in order to avoid the U.K. crashing out of the bloc without a deal next Friday by giving Theresa May an extra two weeks to work out what to do. At a summit in Brussels last Thursday, the EU 27 told May that if U.K. lawmakers don’t endorse her Brexit deal next week, she’ll have until April 12 to decide whether to leave without agreement or request a much longer extension. The decision removes the possibility of a no-deal Brexit in seven days’ time. May’s deal has already failed 2 times until now and this is putting UK government into a difficult situation for the next 2 weeks, while a critical decision must be taken. Options vary, from remaining in the EU for an extended time of period or leaving the EU without deal on May 22.
As it is widely expected, price fluctuations will be dominated by the parliaments voting on the Brexit deal which is due to be taken place on Tuesday. Possibilities of canceling the Brexit voting are high as Theresa May will try to avoid another defeat. Discussions over the weekend are increasing the chances of Theresa May quitting as MP. In such a scenario downside risk of GBP is very high as uncertainty will increase.
On the economic calendar this week we have only on Friday the UK gross domestic product with expectations to remain unchanged at 1.3%.
Technically the pair is positive. New buyers came back and start opening new buy positions at 1.3200 (23.6% Fibonacci level), 1.3123 (38.2% Fibonacci level) and 1.3062 (50% Fibonacci level) targeting profits at 1.3330
For more detail economic calendar events please visit our live economic calendar on:
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