EUR/USD FUNDAMENTALS AND TECHNICAL
Pair closed last week’s trading session marginally higher on widening divergence between the two central banks. ECB officials on the one side are signalling more rates ahead. On the other side FED is signalling softer rate ahead. Last week’s better than expected economic releases in the US failed to give traction on the US Dollar and kept the pair hovering around monthly higher levels as traders and investors are siting on the side and waiting for this week’s rate decisions.
All traders and investors will be standby for this week’s high impact events highlighting the end for 2022, battle against inflation. The FED is due to release its monetary policy and rate decision on Wednesday. The central bank expected to hike rates by 0.25%, something that is already priced-in the pair’s exchange rate and if confirmed it will clearly signal that the FED is willing to stop hiking rates, that will result to triggering stronger selloff in US Dollar. ECB is due to release their monetary policy and rate decision on Thursday. The central bank expected to hike rates by 0.5% signalling stronger rates increases ahead in their fight against inflation.
On the economic calendar, we have on Tuesday, German Harmonized index of consumer prices pointing at 11.3 unchanged from last one. European Economic sentiment expected lower at -67.2 and US consumer price index higher at 6.4% On Wednesday FOMC minutes will be released with a 0.25% rate hike expectation. On Thursday, ECB expected to hike rates by 0.5% and US retail sales expected lower at 0.3%. On Friday, German manufacturing PMI expected higher at 46.7 European composite PMI higher at 48 and US services PMI unchanged at 46.2
Technically the picture is positive after last week’s close firm above 61.8% In this week’s trading session if pair continues on the upside could accelerate gains to full recovery of 100% 1.0750 Alternatively, if pair resumes the downside we are expecting to retest 1.0300 (61.8%). Our traders are short at 1.0500 targeting profits at 1.0300 we are expecting more aggressive sellers above 1.0600 Alternative if pair retreats on the downside we are expecting new buyers at 1.0300 targeting profits at 1.0600
GBP/USD FUNDAMENTALS AND TECHNICAL
Pair closed last week’s trading session marginally lower after both GBP and US Dollar lost their traction for more gains. The better than expected US economic releases failed to fuel the US Dollar as traders and investors are looking into stocks for Santa rally. Both GBP and US Dollar traders stay on the side as they are bracing for the week ahead and the rate decision from both central banks.
As for this week market participants will focus on both central bank’s rate decision. The FED is signalling softer rate hikes ahead as the BOE is failing to give any future signals regarding rate hikes. The FED expected to raise rates by 0.25% on Wednesday’s FOMC. The BOE expected to raise rates by 0.5% on Thursday’s meeting. Traders and investors will be standby ahead of both meetings. The busy economic calendar of this week will generate huge volatility.
On the economic calendar we have on Monday the UK Gross domestic product pointing negative but better than last one at -0.1% UK Manufacturing production lower at -0.1% On Tuesday, ILO unemployment rate steady at 3.6% US consumer price index higher at 6.4% On Wednesday, UK consumer price index expected higher at 11.5%. On Thursday, US retail sales expected lower at 0.3% On Friday, UK retail sales expected lower at -0.2% UK service PMI higher at 49.2 and US service PMI unchanged at 46.2
Technically the pair is positive as the pair closed just below 100% and hovering around higher levels. In this week’s trading session if pair manages to continue on the upside, will keep the overall picture positive and could open the road to more recovery up to 1.2500 Alternatively a reversal on the downside could retest 1.1200 (61.8%) Short sellers are standing firm between 1.1600 and 1.2300 targeting profits around 1.1738 we are expecting new buyers around 1.1200 targeting profits above 1.2300 The pair is sitting into an overbought territory and needs extra caution as a sharp downside correction could be around the corner.
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