Weekly Analysis: Pairs Still in Limbo. Looking Forward to Inflation and Retail Sales Data for a Volatility Boost
Weekly Analysis: In the second part of last week the pair showed some signs of directional movement but overall it is still in a range, bouncing between 1.1600 and 1.1700. The lack of major economic releases contributed to the slow movement.
The sellers have tried several times to break 1.1600 support zone in the last period but all attempts have failed and now price is moving north, towards the confluence zone created by the 50 days Exponential Moving Average, the resistance at 1.1700 and the bearish trend line seen on the chart above. This confluence zone will be tough to break, considering that lately the pair has been moving very slow, but on the other hand, a break would show that finally the balance is tilting towards one side and that more directional movement will follow.
Monday will be a slow economic week for the pair but action picks up Tuesday with the release of the Eurozone Flash Gross Domestic Product and the German ZEW Economic Sentiment, which is a survey of about 300 institutional investors and analysts that asks respondents to give a 6-month outlook for the German economy.
Wednesday the focus shifts on the US Dollar for the release of the Consumer Price Index (which is one of the main gauges of inflation) and the Retail Sales, which represent the main part of consumer spending and thus are very important for the currency itself.
Thursday the Philly Fed Manufacturing Index will show the opinions of about 250 manufacturers from the Philadelphia district regarding overall business conditions in the district, and the week ends Friday with the U.S. Building Permits that will offer insights into the construction activity. Apart from a few major releases, we have another slow week ahead, with the technical side taking center stage.
The Pound retraced higher last week, erasing some of the losses incurred a week before but the pair is still in a range, without a clear trend.
After the bounce at 1.3050 support, price moved higher and reached the 50 days Exponential Moving Average, which is flat, showing that control doesn’t clearly belong to either side. For this week we expect to see a breakout of either 1.3250 resistance or 1.3050 support and if that happens, it will probably trigger additional movement in the direction of the break. Until price moves outside one of the two levels, the pair is ranging and we can expect to see further choppiness.
The first important release of the week will be the British Consumer Price Index, scheduled Tuesday. This is the main gauge of inflation and usually has a strong impact on the Pound, so caution is recommended.
Wednesday’s highlight will be the release of the Average Earnings Index, a report that shows changes in the price that employers pay for labor and the final economic data of the week is scheduled Thursday in the form of the British Retail Sales numbers, which usually have a high impact on the Pound.
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.