EUR/USD FUNDAMENTALS AND TECHNICAL
Pair closed last week’s trading session lower registering a new multi-year low level. The pair reacted negative on divergence between the two central banks. On the one side FED is signalling a 0.75% rate hike on their next meeting this week on Wednesday, on the other side the ECB continues on the same line as before, highlighting that the central bank will continue support the economy. The pair managed to recover some ground after hitting multi year lows at 1.0470. the sharp upside reversal was expected as the pair traded in over sold territory for the last 2 weeks. The sharp reversal was also fueled by the better than expected European growth and the US PCI data.
As for this week market participants will mainly focus on the FED’s meeting and interest rate decision, due to be released on Wednesday, the Central bank expected to hike rates by 0.5%. If a surprise 0.75% will be announced, the pair may retreat lower and hit new lows most probable down to 1.0350 Alternatively if the central bank will fail to deliver a 0.5% the pair will sharp recover ground on the upside. From our point of view, the 0.5% rate hike is already well priced in and the delivery of 0.5% on Wednesday could boost the pair on the upside
On The economic calendar, we have on Monday German retail sales to remain unchanged at 7% and US ISM manufacturing PMI higher at 58. On Tuesday, ECB’s president Lagarde will deliver a speech. On Wednesday, European retail sales expected lower at 1%, US ADP employment expected to show an additional 370K new jobs and US ISM services expected higher ta 59. On Friday, non-farm payrolls expected to show an additional 400K new jobs with the average hourly earnings lower at 5.5%
Technically the picture is negative after last week’s downside move that brought the pair on multiyear lower levels. The pair is trading into oversold territory and we are expecting another one reversal move on the upside in the coming sessions. In this week’s trading session if pair breaks and closes below 1.0470 (0%) will accelerate losses down to 1.0350. If pair manage to maintain recovery and close above (23.6%) could change the picture back to neutral. Our traders are net 100% long with positions opened between 1.1350 to 1.0700 targeting profits above 1.1350 we are expecting more aggressive long positions on the way down. Alternative if pair trades on the upside, we are expecting short sellers to appear around 1.1090 (61.8%)
GBP/USD FUNDAMENTALS AND TECHNICAL
Pair closed last week’s trading session lower on hawkish FED’s comments that are increasing the divergence between the two central banks. The fed signals to hike rates by 0.75% on their next meeting. On the other hand, the BOE kept silence on any rate hike decision. The pair managed to recover some lost ground by the end of the week as it was already traded in an oversold territory and from some short positions profit taking.
As for this week market participants will be focus on both central bank’s monetary policies and rate decisions. Pending to see for this week is how far the two central banks are willing to go. Fed is expected to deliver 0.5% rate hike, if do so, this is already well priced-in, and pair could continue recovery. The question remains on BOE decision. If the BOE will surprise with a rate hike the pair will accelerate recovery on the upside. Alternative if BOE fails to deliver a hawkish stance the pair could accelerate losses.
On the economic calendar we have on Monday the US ISM manufacturing PMI pointing higher at 58. On Tuesday, UK manufacturing PMI expected to remain unchanged at 55.3 On Wednesday, ADP employment expected to add 370K new jobs US ISM services PMI expected higher at 59. On Thursday, bank of England monetary policy meeting and rate decision will be released. Markets expected a rate hike of 0.25% the decision will be followed by a speech from BOE’s governor Bailey. On Friday, US Non-farm payrolls expected to add 400K new jobs.
Technically the pair is negative after last week’s sharp downside move and a break below strong support of 1.3000. In this week’s trading session if pair continue recovering on the upside we are expecting to test 1.2700 (23.6%) Alternatively if pair continues trading on the downside a break below (0%) could accelerate losses down to 1.2300 Our traders are net long 100% with positions opened between 1.3412 to 1.2500 targeting profits above 1.3400 We are expecting more aggressive buyers on the way down and short sellers to appear around 1.3170
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