Last week the European Central Bank left the Interest Rate unchanged and Mario Draghi strongly suggested that more unconventional measures might be used in order to prevent deflation. The U.S. Non Farm Payrolls came out lower than estimated but the number didn’t disappoint completely and the actual release generated mixed reactions among market participants.
During the last two days of last week, the bears pushed the pair through the support located at 1.3700 but failed to close price below this level. At the moment, 1.3700 still has the potential to push price higher and this level will probably be the most important of the week. A clear break would be a major victory for the bears and would open the door for a touch of 1.3480; even if this comes true, we don’t expect the entire distance to be traveled in one week. On the other hand, a bounce higher would meet resistance at 1.3830. The latest momentum is bearish but we are still trading in an uptrend from a Daily chart perspective so moves higher are a distinct possibility.
The German Industrial Production numbers are released Monday, showing changes in the total value of output produced by industrial sector. Tuesday’s only notable indicator is released by the U.S. Bureau of Labor Statistics in the form of the JOLTS Job Openings, while Wednesday the Minutes of the latest Fed Meeting are released, containing insights into the reasons which influenced the members’ votes regarding the interest rate level.
Thursday the ECB Monthly Bulletin is made public, containing the Bank’s point of view on the current and future economic situation. The same day, the Group of 20 (G20) will meet in Washington DC, with the main subject under discussion being the Ukrainian crisis. Although the meetings are closed to the press, a statement will be released once they have ended and sometimes officials talk to journalists throughout the day.
Friday the G20 meetings will continue and the U.S. will release the Producer Price Index (tracks changes in the price charged by producers for their goods) as well as the University of Michigan Consumer Sentiment, a leading indicator of consumer spending based on the opinions of about 500 consumers. The German CPI’s Final version comes out the same day, but it is not considered a high-impact indicator because the Preliminary version, which holds the greatest importance, is already released.
Throughout last week the British economy posted weak data and this was reflected in the Pound’s performance, allowing the pair to fall below the major support located at 1.6600.
Major support was broken again but there are still strong barriers in front of falling prices. The first such barrier is located at 1.6480, a level which ended the bears’ previous run and rejected price almost 200 pips higher. From a strictly technical point of view we anticipate another encounter with this level but the economic data released during the week can change this bias.
The first important British release of the week is the Manufacturing Production which comes out Monday and measures changes in the total output produced by manufacturers. It’s a leading indicator of economic health focused on the manufacturing sector, which represents about 80% of the entire Industrial Production of the United Kingdom. An estimate of the British Gross Domestic Product will be released the same day.
The most important event for the Pound will be the release of the Official Bank Rate which is scheduled Thursday but is not expected to change from the current 0.50%. Together with the Interest Rate, the Bank of England will also announce the Asset Purchase Facility value (also known as Quantitative Easing) which represents the amount of money the BoE is prepared to create and use to purchase assets in the open market with the purpose of stabilizing the currency. The U.S. events mentioned above will have a direct impact on the pair’s movement.