A Weekly Look at the Market February 19th
A short week ahead, with this Monday’s Chinese New Year and The President’s day in the US. Volatility will be law on Monday and liquidity will be reduce. Caution must be in place in such a reduced liquidity because this is what the so-called “fat fingers” are waiting for in order to create unexpected price spikes and profit out from the price swings.
On Tuesday, the Royal Bank of Australia will release their minutes. Expectation are for a hawkish tone, following last week’s speech from the Governor, saying that it is time for monetary stimulus to be withdraw in the near future. Traders will focus on this week’s minutes in order to find clues on when the RBA will start to reduce stimulus. A hawkish tone will help AUD to recover some losses from last month’s selling pressure.
On Wednesday we have the ILO unemployment, average earnings and Inflation report. Inflation report will play a major role in this week’s volatility, as it is the main concern for BOE monetary policy. Gross domestic is due on Thursday. Economic factors are on the second place for this week as the meeting between P.M. Theresa May and Chancellor Angela Merkel were not so favorable for the ongoing EU/UK negotiations. P.M. May proposed keeping Britain in total alignment with the European Union’s data-sharing rules after Brexit, something that would allow both intelligence agencies and business to continue to share information across borders. On the other hand, chancellor Merkel said that; “It’s not Cherry-picking to want Unique Brexit Deal” meaning that the EU will not allow such a proposal. The results from the meeting may push GBP lower
On a technical point of view, we maintain a bullish sentiment and continue to buy into drops. First buy order is place at 1.3800 and the next strong buy order at 1.3600
Euro Volatility is expected to increase this week starting on Monday with the Eurogroup meeting, EcoFin Meeting on Tuesday, ZEW survey for Eurozone and Germany, on Wednesday market manufacturing PMI for Eurozone and Germany and finally on Friday the very important numbers of CPI for Eurozone. Take into consideration that price of EUR/USD will depend also on the FOMC minutes, due on Wednesday. A hawkish tone will push the rate on the low side of our uptrend channel. The other factor behind a possible drop in EUR/USD are the upcoming Italian elections next month.
Technical trading is still bullish as the pair is still trading in the uptrend channel formed since October 2017. We maintain our trading recommendations to buy into the dips. The first weekly support and a cautious buy order is standing at 1.2350 and the next at 1.2216