The Federal Reserve speeds up its quantitative tightening, and this is certainly bullish news for the USD. At the same time, this is a negative factor for the American stocks, which have entered their seasonally worst month.
Weekly Market Outlook: April 8-12
Let’s talk about the events that will affect the markets this week! Although it’s the beginning of the month. The economic calendar doesn’t offer many events to trade on. However, this week will differ with data for different markets. The beginning of the week is quite calm.
Wednesday will become the most interesting day for traders.
Let’s start with the major currencies. The GBP, the EUR, and the USD will be under pressure.
GDP growth and Manufacturing Production figures will determine the direction of the British pound. Up to now, forecasts are not encouraging, but the direction of the currency will mostly depend on the actual releases. Greater readings will push the British currency up, while weaker ones will pull it down.
What about the euro?
The European central bank will announce the interest rate and will host a press conference. While the market doesn’t anticipate any changes to the rate, the press conference and comments by Mr. Draghi will affect the European currency a lot. Last month, the ECB pushed back the earliest possible date it could raise interest rates to 2020, rather than summer this year as previously expected. Moreover, the central bank announced a new tranche of cheap loans to banks. There is no light among the weak forecast for the growth and inflation of the European area. Traders should follow the mood of the ECB. The hawkish tone will provide a good chance for the euro to rise, the dovish one will cause suffering of the currency.
EUR/USD will be the most volatile that day because not only the central bank meeting will affect the pair but also the American data. Wednesday sees the release of a US inflation measure. After the mixed jobs data that were out at the end of the last week, the inflation figures will be under high attention. During the American session, the Federal Reserve will release its meeting minutes. Any additional clues on the future monetary policy will create volatility of the USD.
Not only the economic calendar but the news may shake markets on Wednesday. The International Monetary Fund, which holds its spring meetings, will update its global outlook and may provide some important comments on the different important world political and economic issues. Follow news with FBS to be up to date.
What about the exotic currencies?
Monthly inflation figure for Brazil is due out on Wednesday too. A day later, the Central Bank of Mexico will release its minutes from the March meeting.
Also on Thursday, the American producer price index will be taken into consideration by traders that will determine the direction of the USD.
Let’s consider technical setups.
What is the phase for the EUR/USD pair?
On the weekly chart of the pair, the Awesome Oscillator formed a bullish divergence with the chart that is the positive signal for the pair. On the daily chart, the Parabolic SAR keeps forming dots above candlesticks. It’s a signal of the downward pressure. However, the situation may change soon. On Friday, the price formed an inverted hammer candlestick that may be a signal of the movement up. However, we need to wait for further confirmation to be sure. The first resistance lies at 1.1249. As soon as this level is broken, the pair will be able to keep rising towards 1.1287. The third weekly resistance lies at 1.1321. If the central bank is dovish and the USD appears to be stronger, the consolidation may continue. A fall below 1.1215 will increase risks of the decline to 1.1178. The next support lies at 1.1144.
GBP/USD and the movement within the descending triangle
On the weekly chart, last week movement formed a spinning top candlestick that signals uncertainties about the further direction. On the daily chart, the pair keeps trading within the descending triangle. To prove the downward movement bears need to pull the pair below 1.2975. Following supports will lie at 1.2948, 1.2862. However, until the pair breaks 1.2975, bulls may control the situation pushing the Cable above 1.3072. The next significant resistance lies at 1.3158. As soon as this level is broken, the descending triangle won’t make sense. Next resistance to follow is 1.3283.
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