EUR/USD

The first part of last week’s trading was characterized by rather slow and unclear movement until ECB President Draghi hinted during the ECB Press Conference that additional monetary stimulus will not be introduced at this time, a comment perceived as heavily bullish by market participants. A better than estimated value of the US Non Farm Employment report brought the pair down, but the fall was almost insignificant compared to the previous rally.

10-03-2014 10-40-04 AM

Technical Overview

The pair is trading well above the 200 period Exponential Moving Average and the important resistance located at 1.3830 was broken last week. These are clear signs of a bullish market in which higher prices are anticipated, but given the importance of the recently broken level, we need to see a test from above, followed by a bounce higher in order for us to consider this a true break of resistance. Price is showing rejection on a Daily chart (Friday’s candle has an upper wick which is longer than its real body) and the Stochastic oscillator started to turn downwards after a visit above the 80 level which indicates an overbought market. These factors make us believe that price is heading for a retest of 1.3830; the result of this move will most likely determine the next medium term direction and will show if previous resistance has turned support or if the bears will step in to regain control.

Fundamental Overview

The Eurogroup meetings take place Monday in Brussels and are attended by some of the most important figures of the economic, political and financial scene, including the Eurogroup President, ECB President and Finance Ministers of the member states. Sharp moves may be experienced, depending on the matters discussed. Tuesday the German Trade Balance is made public and Wednesday the Euro zone Industrial Production is announced.

The US Dollar has a slow week ahead and the first important event comes Thursday in the form of the US Retail Sales which are a crucial part of any economy because they represent the major part of consumer spending. Friday the American Producer Price Index is announced, showing the change in prices charged by producers for their goods; the indicator has inflationary implications because a higher producer price will eventually generate higher consumer prices, possibly increasing inflation. The same day the US Consumer Sentiment will be announced by the University of Michigan; consumer confidence is a leading indicator of consumer spending which in turns plays a critical role on the economic scene.

GBP/USD

Last week British data didn’t offer any surprises and values were close to expectations, creating ranging price action and a Doji weekly candle.

10-03-2014 10-41-07 AM

Technical Overview

Price is still struggling to break the resistance located at 1.6750 but so far the bulls lack the necessary power to do it. The pair has been trading for a relatively long time between 1.6600 support and 1.6750 resistance and until a clear breakout is experienced, the picture will remain unclear. All attempts at breaking resistance result in a bounce lower or a stall and if the bulls won’t manage to take the pair above the mentioned level early in the week, another encounter with 1.6600 support is a distinct possibility.

Fundamental Overview

Tuesday is the most important day of the week for the Pound as the British Manufacturing Production is released. Its importance comes from the fact that manufacturing output represents a major part of UK’s Gross Domestic Product and is seen as a short term indicator of economic strength. The same day, Bank of England Governor Mark Carney will testify on the economic outlook and inflation before the Treasury Committee of the Parliament. The testimony is regarded as a high impact event and will most likely generate strong movement. Throughout the week the pair will be directly affected by the outcome of the US events mentioned above.