Weekly Analysis: Markets Prepare for Fed Chair Yellen’s Testimony
Weekly Analysis: Last week the pair retraced lower, mostly due to overbought condition but after failing to break support, it returned to the levels seen in the beginning of the week. U.S. employment data was solid and brought the pair lower for the end of the week.
The pair is showing rejection again near 1.1450 resistance and the NFP report showed a better than anticipated reading, so its effects will be probably seen throughout this week. The pair is in a clear uptrend but for the short to medium term we expect to see a move into 1.1300 – 1.1280, mostly because the bulls failed twice to break the key resistance at 1.1450. However, if that resistance will be broken early in the week, we may see a move into 1.1500 but Fed Chair Yellen’s testimony is likely to decide the next move.
The week starts slow, with the first two days lacking any major events. Action picks up Wednesday when Fed Chair Yellen will testify before the House Financial Services Committee on the topic of the Semiannual Monetary Policy Report. Thursday she will testify on the same topic but this time before the Senate Banking Committee and the same day the U.S. Producer Price Index is released.
Friday the always important U.S. Consumer Price Index comes out, showing changes in the price paid by consumers for the goods and services they purchase and the final event of the week will be the U.S. Retail Sales. The Euro doesn’t have anything major on the calendar but the U.S. releases are considered high impact so we expect to see volatility throughout the week.
Last week belonged to the bears after another failed attempt to move above 1.3050 resistance. Later in the week, the U.S. jobs data added more strength to the greenback and now the pair is approaching support.
The bullish move seen over the last weeks failed to break 1.3050 resistance and now the pair is moving south, with an overbought Stochastic and good downside momentum. The short term outlook is bearish, anticipating a touch of the support at 1.2850 and the 50 days Exponential Moving Average; if this barrier is broken, the next target will become 1.2770 but on the other hand, a break will probably generate a climb into 1.3000 area.
The Sterling has a very slow economic week ahead, with the only notable indicator being the Average Earnings Index, released Wednesday. The index shows changes in the price that businesses and government pay for labor and usually has a high impact on the currency. Of course, the U.S. events will have a direct impact on the pair’s movement, as always.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 7-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.