Friday’s trading session was characterized by a close encounter with the support located at 1.3700, followed almost immediately by a bounce higher. The German CPI posted a lower value but apparently this value was still better than some market participants expected.
Price climbed to touch the level of 1.3770 but this generated a four hour pin candle which indicates rejection and a possible move lower. The 200 Exponential Moving average is in close vicinity, a fact which creates a confluence zone and adds strength to 1.3770 resistance. If this confluence zone is broken, the next level of importance is 1.3830 while a bounce lower may encounter support at 1.3700
The European Consumer Price Index is released today at 9:00 am GMT and expected to decrease from the previous 0.7% to 0.6%. Since this is the prime measurement of inflation in the Euro Zone, higher than estimated figures have the potential to strengthen the Euro. Later in the day, at 1:55 pm GMT, Fed Chair Janet Yellen will speak at a Conference in Chicago and as always, her speeches can be strong market movers, depending on the subjects in focus.
Price climbed slowly during Friday’s session and finished the week on the resistance level located at 1.6640. The economic data didn’t have a strong impact on price action and the pair traded in a 60 pip range.
The 200-period Exponential Moving Average is starting to move flat, without a clear direction but the four-hour Stochastic is hovering above the 80 level which indicates an overbought condition of the market. If 1.6640 resistance holds and manages to reject price lower, we anticipate a return below 1.6600. However, oscillators can remain overbought or oversold for an extended period so moves above 1.6640 are still possible.
Early at 8:30 am GMT the Bank of England will announce the value of the Net Lending to Individuals. This indicator is correlated with consumer spending which may increase in the near future if the volume of loans is higher. Today’s anticipated value is 2.3B while the previous was 2.1B.
Governor Mark Carney is scheduled to speak at 5:15 pm GMT at a press conference organized at the Bank of England, in London. As always, these types of speeches can bring sudden volatility in the market and sharp turns. The U.S. event has the same potential so use caution if trading at the time of these events.