Last week the Euro reached a two and a half year high but bearish pressure has been present ever since. Turmoil coming from Ukraine was reflected in the market in the form of abrupt reversals especially seen on the lower time frames and overall the week was rather difficult to trade.
Although the pair printed a new high at 1.3966, signs of bearish moves are present on a Daily chart: the Stochastic has been overbought for quite a long period and Thursday’s daily candle is showing a long upper wick which indicates rejection and a potential turning point. If price moves lower, the first support will be located at 1.3830 while to the upside, the recent high at 1.3966 will probably offer some resistance. An important level to watch is 1.4000 which may act as psychological resistance given the fact that it’s a round number. We slightly favor a bearish move this week but keep in mind that bulls are still in medium-term control of the pair.
The first important event of the week is the release of the German ZEW Economic Sentiment which is scheduled Tuesday and is based on the opinions of about 275 German professional investors and analysts who are asked to give a 6-month outlook for the German economy. Higher numbers suggest optimism and usually strengthen the Euro against its counterparts. The same day, the American Consumer Price Index is released, a high impact indicator which acts as a main inflation gauge and shows the change in prices paid by consumers for the goods they purchase.
Wednesday will most likely be the most important day of the week for the greenback as the Interest rate will be announced and the Fed will also decide if they will further trim the monetary stimulus package. Fed Chairman Yellen will hold a Press Conference later in the day, an event which is expected to be a huge market mover. Thursday’s main events come from the US as well, in the form of the Existing Home Sales numbers, Philly Fed Manufacturing Index and Unemployment Claims, three indicators of economic health and future consumer spending. Friday the Euro Zone Consumer Confidence will be released and although it is not considered a high-impact indicator, strong moves can be triggered by surprising values.
The Pound weakened against the greenback throughout last week and the pair attempted twice to move below the support located at 1.6600. However, price action was characterized by a lot of back and forth movement and a break of major support or resistance didn’t occur.
Indecision still rules the market but last week’s price action reveals the fact that bearish pressure is accumulating: the bulls made a run for 1.6750 but price quickly reversed before that target was reached and is now sitting on major support again. Important to note is also the fact that on a Weekly chart, the Stochastic didn’t move below its 80 level since late 2013, indicating an overbought condition which is likely to trigger moves south. On a Daily chart the pair is still trading above the 200 period EMA so the market is still considered bullish; the main levels to watch this week remain 1.6750 and 1.6600.
The week’s most important day will be Wednesday when a cluster of events take place: the Bank of England will release the Minutes of their latest meeting, offering insights into the economic reasons which stood behind the Interest Rate votes. The same day the British Claimant Count Change is announced (which shows the fluctuation in the number of unemployed people), alongside with the Unemployment Rate which has the same time of release. Lower values for both jobs-related indicators are perceived as bullish for the Pound because lower unemployment levels suggest a thriving economy. Without a doubt, the US events mentioned earlier will have a direct and strong impact on the pair.