Weekly Analysis: Uptrend Wavers as the US Dollar Fights for a Comeback
Weekly Analysis: Most of last week’s price action took place around 1.1700 support, which appeared broken several times but the pair returned above it almost immediately. The fundamental scene was pretty dull, and didn’t generate strong moves.
The uptrend is weakened now because a lower high was printed last week (1.1840) but support is still holding and the latest candles show long wicks in their lower part, which is a sign of rejection. All this creates a mixed picture, without a clear bias but as long as the pair is trading above 1.1700 – 1.1713 and above the 50 days Exponential Moving Average, we expect to see a continuation of the uptrend and a move closer to 1.1875. A break of the mentioned support and a move below the 50 days EMA would be a strong sign that the uptrend is coming to an end.
The first notable release of the week is the German ZEW Economic Sentiment, scheduled Tuesday. The survey shows the opinions of about 275 German professional investors and analysts regarding the state of the economy for the next 6-months and usually has a medium impact on the currency.
Wednesday the focus remains on the German economy for the release of their Manufacturing and Services PMIs, which are surveys of purchasing managers regarding the health of the respective sectors. Usually the impact is medium but higher numbers show optimism and strengthen the Euro.
Thursday the Jackson Hole Economic Symposium will start and will be attended by central bankers, finance ministers and other personalities from around the globe. This event is held annually and can have a significant impact, depending on the matters discussed and the attitude of the speakers.
Friday the US Dollar will be affected by the U.S. Durable Goods Orders and the Jackson Hole Symposium will continue in Wyoming, so this can affect other currencies as well, not only the greenback.
The British Consumer Price Index (main gauge of inflation) missed the market consensus of 2.7% and showed a reading of 2.6%. This triggered the biggest move of last week and brought the pair into the support at 1.2850 but the bearish momentum soon faded and support remained intact.
The pair is trading below the 50 days Exponential Moving Average, a fact which makes the short-to-medium term outlook bearish. However, we can see that for several days the bears have tried to break 1.2850 support and each time they failed, so this level will be this week’s main “player”. A bearish break will make 1.2770 the immediate target, followed by 1.2630 in the longer run. A bounce at 1.2850 will take the pair into the 50 EMA, followed possibly by 1.3050.
Tuesday the British Office for National Statistics will release the Public Sector Net Borrowing, which is a report that shows the difference between spending and income for the government and public corporations. A higher deficit usually weakens the Pound but the impact is not very high.
Thursday the Second Estimate British Gross Domestic Product is released, showing changes in the total value of goods and services produced by the economy. The GDP usually has a high impact on the currency so we expect to see increased volatility. The same day the Jackson Hole Symposium starts and British representatives will attend so the Pound may be affected.
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.