Weekly Analysis: The Week Ahead: ECB’s Draghi and BOE’s Carney Testify, U.S. Prepares for Thanksgiving Day
Weekly Analysis: Buying interest around the Euro increased last week and the pair moved above several types of resistance, finishing the week more than 100 pips higher than it started.
The bulls managed to break the confluence zone created by 1.1700 resistance, the 50 days Exponential Moving Average and the bearish trend line seen on the chart above. This shows that momentum is clearly on the Euro side, so we expect to see a touch of the resistance at 1.1875 early in the week. If the level can be surpassed, the next target will become the key level at 1.2000 but it could take more than a week for the bulls to cover the entire distance. A move below the confluence zone mentioned earlier would invalidate this scenario.
The week opens Monday with the double testimony of ECB President Draghi before the European Parliament Economic and Monetary Affairs Committee. This is likely an event that will generate increased volatility on Euro pairs, so caution is advised.
Tuesday the economic scene will be calm and Wednesday the FOMC will release the Minutes of their latest meeting, containing details about the reasons that determined the rate vote. More importantly, if the document offers hints about future rate changes, then we will probably see strong USD movement.
Thursday U.S. banks will be closed in celebration of Thanksgiving Day and on the Euro side the Manufacturing and Services PMIs will be the most notable releases. The week finishes Friday with the German IFO Business Climate, which is a survey with a large sample size of about 7,000 businesses that are asked to rate current economic conditions and to offer a 6-month outlook.
Price action was choppy, with a bullish bias last week and the pair didn’t manage to break out of the range. British data was mixed, with lower than expected CPI but better employment numbers.
The 50 days Exponential Moving Average is flat and price is bouncing between 1.3050 support and 1.3250 resistance; also, the oscillators are moving without clear momentum and all this is indicative of a ranging market. The last daily candle shows a long wick in its upper part and this increases the probability of a bounce lower but overall trading will remain range-bound until a clear breakout occurs. The levels to watch are 1.3250 followed by 1.3320 as resistance and the lower part of the range is represented by 1.3050.
The Pound has a slow economic week ahead, with only three notable events: Tuesday the Public Sector Net Borrowing comes out, showing differences in value between spending and income for government and public companies. The same day, Bank of England Governor Carney will testify before the Parliament's Treasury Committee on inflation and economic outlook
The last release of the week will be the Second Estimate Gross Domestic Product scheduled Thursday. The GDP is the main gauge of an economy’s performance, however this version is not as important as the Preliminary, which was already released.
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.