Weekly Analysis: Last week the bulls scored an important victory by moving the pair above the 50 days Exponential Moving Average but some of the gains were erased later in the week. Overall, price action was bullish, but key resistance (1.0800) was not broken.
Price is capped to the upside by the resistance at 1.0800 and to the downside by the 50 days EMA as well as several support levels. The last two days show candles with wicks in their upper and lower sides respectively, which is a sign of indecision but the focus early in the week will be on the French Presidential Election, which will generate increased volatility and possibly a strong move in one direction. For this reason, we recommend caution, especially during the first part of the week.
The first important release of the week is the German IFO Business Climate, scheduled Monday. This is a survey of about 7,000 businesses, derived from their opinions on current and future economic conditions. Also keep in mind that the French Presidential Election held on Sunday will probably have a strong impact on the Euro in the beginning of the week.
Tuesday the focus shifts towards the US Dollar for the release of the U.S. Consumer Confidence survey and Wednesday is a slow day, without any major economic releases.
Thursday will be the most important day of the week for the Euro as the European Central Bank meets to announce the interest rate. Soon after the announcement, ECB President Mario Draghi will hold a press conference, discussing the rate decision and answering journalists’ questions. Usually the conference creates strong volatility and possibly irregular price action.
The trading week finishes Friday with a potential market-mover for the US Dollar: the U.S. Advance version of the Gross Domestic Product. Out of the three versions of the GDP (Advance, Preliminary and Final), this is the earliest and tends to have the strongest impact.
British Prime Minister May called for a snap General Election that will take place in June and this was the highlight of last week, triggering a huge move to the upside that took the pair above the long time resistance at 1.2770.
After breaking the top of the channel that confined the pair for a long time, price stopped between 1.2850 and 1.2770 and remained there for the rest of last week. The bias is now bullish but it must be noted that the Relative Strength Index and Stochastic have both reached overbought and this is an early sign that a bearish pullback will soon occur. The French Presidential will have an impact on the markets and this pair will probably be affected as well, thus we recommend caution, especially early in the week.
The Pound has a very slow week ahead in terms of economic indicator releases. The only major indicator is the British Preliminary Gross Domestic Product, scheduled Friday. This is the main gauge of an economy’s performance and usually strengthens the currency if it posts higher than expected numbers.
Written by: Bogdan Giulvezan