FOREX TECHNICAL ANALYSIS: DOWNTREND REGAINS MOMENTUM. ECB MEETING IN THE SPOTLIGHT
EUR/USD
Forex Technical Analysis: Last week the bears took control of the pair and managed to take price almost 500 pips lower. Each day finished lower than it started and only brief bullish movement was seen.
Technical Outlook
The bullish trend line was broken decisively last week after a bounce at the 50 period Exponential Moving Average on a Daily chart and now the bears are in control of the pair. The oscillators don’t indicate oversold condition but we expect price to pause or even bounce higher if the important support at 1.0500 is reached. First potential resistance is located at 1.0720 but the bias remains bearish, with the possibility of bullish pullbacks.
Fundamental Outlook
Monday the fundamental scene is slow and no major news is released but Tuesday an important economic indicator will affect the US Dollar: the U.S. Retail Sales. The Fed is closely watching how the economy performs and an increase in sales made at a retail level could mean that we are one a step closer to a rate hike.
Wednesday the ECB will announce the interest rate and President Mario Draghi will hold a press conference which will offer more details about future monetary policy. The press conference is almost always accompanied by strong reaction on euro related pairs so caution is recommended.
Thursday keep an eye on the U.S. Building Permits and Friday the U.S. CPI will be the main market mover because this is one of the most important gauges of inflation.
GBP/USD
Dollar strength was seen against the Pound as well and the pair traveled south for the entire week, breaking the important support located at 1.4830. The Bank of England kept the interest rate unchanged at 0.50% and didn’t offer hints about the next increase.
Technical Outlook
After breaking 1.4830 decisively the pair traveled into the support located in the zone around 1.4635 but although the week finished below this level, the break cannot be considered valid yet. However, as long as price remains below 1.4830, the bias is negative and we expect the downtrend to continue. If this is the case, the next support is located around 1.4350, a level better seen on a Weekly chart.
Fundamental Outlook
British inflation data comes out Tuesday in the form of the Consumer Price Index and Friday we will get insights into the British unemployment situation once the Claimant Count Change is released. Other than that the Pound has a slow week in terms of news releases and center stage will be held by the U.S. announcements.