Alpesh Patel
InvestingBetter.com
General market theme
An interesting start to the week ahead yesterday even though the calendar was empty of any important news and we expected reduced volatility. Early in the morning it seemed that the European majors would give up significant ground to the US Dollar but in the afternoon this bias was reversed and both the Euro and the Pound started climbing higher again. The focus this week is mainly on the Euro as the ECB is expected to ease further on their upcoming monetary policy meeting however investors are keeping an eye on the Pound as well while the UK is preparing for the Brexit referendum.
Price action highlights
The Euro started the day in the red and after posting strong gains on Friday after the Non-Farm Payrolls report the currency started declining in early European session. However after the Single currency tested the 1.0950 support the decline halted and the Euro picked up pace to the upside trading above the 1.1000 area to end the day around the 1.1020 level. This is an interesting turn of events, the bias on the Euro is towards lower levels as ECB is expected to do their best to ease further as an expensive currency is not the best option for growth. However given the recent price action we need to see a decline below the 1.0950 level to be convinced about a reversal on the Euro.
Similar to the Euro the Cable started the week trading lower moving towards the 1.4150 support level where the 55-period EMA was situated. It seems though that traders are cautious about back the Dollar at this time even though the NFP report provided strong evidence of a good performance from the US labor market. As a result the Cable hiked above the 1.4250 level by the end of the day and this morning the currency is trading around the 1.4260 area. Even though we’re amazed from the Pound’s resilience we remain conservatively bearish ahead of the upcoming referendum and a technical break below the 1.4140 level will clear the path for lower levels.
Focus of the day
Today the focus will be mainly on the European majors as there are no important US-related reports on the docket. Early in the morning the release of the Eurozone GDP levels will be closely monitored and expectations are set for a steady printing while earlier in the day key BoE officials including Governor Carney will be testifying at Parliament on Brexit so the Pound will be in play as well.
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