Pair closed last week’s trading session unchanged after another failed attempt to break lower. Volatility was high during last week as investors are weighing the banking sector credibility. FED might manage to save first republic bank although the fall out of SVB and the turmoil in Europe’s Credit Suisse triggered new fears of domino collapse in the banking sector. The banking turmoil triggered some selloff in the US Dollar as the current situation may keep FED back from hiking rates. On the Euro side, ECB increased rated by 0.5% as it was widely expected. The comments from the press conferee were taken as dovish from traders and investors and kept the pair trading in the same range as last week.
As for this week, Traders and investors, will mainly focus on the banking news. Swiss central bank announced a package of 54 billion to help Credit Suisse. ECB commented that banking sector in the EU is holding strong liquidity and there is no worries that will be affected by the US banking turmoil. Although given the same reaction back in 2008 investors and traders are staying cautions and they chose to stay away for now. The speech from ECB’s Lagarde will be closely followed and the FOMC rate decision will defy whether the central banks are in a position to control and avoid a new domino collapse.
On the economic calendar, we have on Monday the German Producer price index pointing at -0.5% On Tuesday, European ZEW economic sentiment expected lower at 23.2 on Wednesday FOMC minutes will be released with a rate hike of 0.25% in focus. On Thursday European consumer confidence expected at -18.2 On Friday, German Manufacturing PMI expected higher at 47 European composite PMI unchanged at 52 and US Durable goods orders higher at 0.9%
Technically the picture is neutral after last week’s close just below 50%. In this week’s trading session if pair continues on the upside and breaks above 50% could change the picture to positive and re-test 1.0765 Alternatively, if pair resumes downside we are expecting to re-test 1.0500 Our traders are net long with buyers standing between 1.0870 and 1.0600 targeting profits around 1.1000. We are expecting more aggressive buyers on the way down and short sellers to appear above 1.0800.
Pair closed last week’s trading session higher mostly due to US Dollar’s sell off due to banking sector fears. It was a difficult week for the banks as the fall out of SVB and signature bank triggered cash out flows from Credit Suisse and first republic bank in the US, both central banks, the FED and SNB injected cash into the banks to help stabilized the system, although investors and traders preferred to stay away from forex pairs and switch into other safer heaven assets. Fears of a new 2008 domino banking collapse is spread around global markets and this is keeping the pair in high choppy volatility.
As for this week traders and investors will focus on both central banks interest rate decisions and press conferences. Both central banks the FED and the BOE are expected to hike rates by 0.25%. given the current turmoil in the banking sector investors and traders need to be cautious as the central banks might hold back from increasing interest rates and this will add more fears in the markets as it will signal a new 2008 banking crisis.
On the economic calendar we have on Wednesday, the UK consumer price index pointing lower at 9.8% and FOMC rate decision with expectation to increase rates by 0.25% On Thursday, BOE rate decision with expectation to increase rates by 0.25% On Friday, UK retail sales expected at -4.7% Gfk consumer confidence lower at 4.1% UK Manufacturing PMI higher at 50 and US durable goods orders higher at 0.9%
Technically the pair is positive after last week’s close just below 23.6% level. As for this week if pair continues on the upside and break above 23.6% could open the road for 1.2400 Alternative if resumes the downside, and breaks below 38.2% will retest 50% Our Buyers are taken profits at 1.2200 and now standing on the side waiting for a new buy opportunity around 1.1950 Short sellers appear at 1.2200 targeting profits at 1.2000
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