WEEK AHEAD Feb.12th – 16th
A heavy economic calendar will dominate this week.
Starting from Tuesday the 13th, U.K. CPI expectations are down to 2.9% from last month’s 3%, however, this reading is already priced-in. Any number above 3% will push GBP higher as traders and investors will begin buying GBP aggressively in speculation that BOE will be more hawkish in their next policy meeting. Any number below 2.9% will push GBP lower because it will keep BOE on, hold and see, for their future policies. On Friday the 16th we have retail sales, expectations are to see an increase on a monthly basis, however, on a yearly basis the projection remains weak showing that consumers are still weighing the impact of Brexit and spending is reduced due to Brexit negotiations and uncertainty. Brexit negotiations will continue to affect trading on GBP and must be followed closely because a new gap between EU and UK negotiators will push GBP lower even though economic events may be positive.
On a technical point of view, traders maintain their bullish sentiment and continue to buy into drops. Last week’s buy on 1.3800 looked like a good entry with the next buy to be found around 1.3600. GBP is still trading in an uptrend channel formed since February 2017.
Euro Volatility is expected to increase on Wednesday the 14th with German Harmonised index of consumer prices and later European Gross Domestic Product, as for the rest of the week there will not any be major economic events, so the EURO pairs direction will be in the hands of USD and GBP counterparties.
Technical trading is still pointing bullish as the pair is still trading in the uptrend channel formed since October 2017. Traders are still buying into the dips. First weekly support is standing at 1.2192 and the next at 1.2075, an old resistance that will be act as support this time.
Always in the first place, and always the stronger counterpart of both above mention EURO and GBP is USD. On Tuesday the 13th a speech from Cleveland Fed President Loretta Mester, is due to be bring some upward push for USD, a well-known hawkish member is ready and expected to verbally intervene to the dollar’s strength. On Wednesday the 14th, consumer price index is expected to remain the same at 2.1%, keeping a closer look to the new release, a bigger reading will push dollar higher as we are also get closer to the next FOMC with traders positioning for a rate hike. On Thursday the 15th, initial jobless claims expected to increase somehow, but is less important for USD strengthening compare to the other economic events.
Equity markets are still volatile and show more signs of a drop below current levels. As the markets are anticipating a rate hike next month, it is obvious that equities will be the first to be affected.