Key Points:
- U.S. Preliminary GDP likely to be key in the week ahead.
- Initial bias for the week ahead is neutral.
- 1.1097 support likely to be key in the week ahead.
The Euro had a resoundingly positive week as the pair reacted to slipping greenback sentiment following a rise in U.S. political risk. In particular, news that President Trump might have attempted to interfere in the FBI investigation largely overshadowed the economic data. Subsequently, the Euro rallied sharply to close the week around the 1.1206 mark. Moving forward, monitor the U.S. Unemployment Claims and Core Durable Goods Orders figures.
Last week proved to be a positive one for the Euro Dollar after sentiment for the greenback sunk following news that President Trump might have attempted to influence the FBI investigation into the Russian election allegations. This caused an immediate rout to the Dollar and saw most of the cross pairs rising. Subsequently, the Euro gained strongly and rallied late into the week thereby closing around the 1.1206 mark. Fundamentally, the Eurozone GDP figures came in on target at 0.5% q/q whilst the CPI results proved robust at 1.9% y/y. On the U.S. side, the Unemployment Claims figures came in fractionally below estimates at 232k, whilst Industrial Production rose to 1.0%. Subsequently, despite a range of strong results from both economies, the focus was less about the results and more about the growing U.S. Political risk.
Looking ahead, the market’s focus is likely to be primarily upon the bevy of U.S. economic data due out in the coming week. In particular, the release of the Fed’s FOMC minutes will be closely watched for any signs that the central bank is gearing up for additional near term hikes. As far as actual data releases go, the Unemployment Claims and Core Durable Goods Orders are the key metrics that are likely to provide the market with some volatility. This time around, the Unemployment Claims are forecast at 238k but are likely to come in significantly below that level. Subsequently, watch the pair for any sharp moves following the aforementioned events.
From a technical perspective, the extension of the rally above the 1.1200 handle has likely exhausted the current move with the RSI and Stochastic Oscillators now trending sideways within overbought territory. Subsequently, there is plenty of scope for either a period of moderation or a pullback which predicates a neutral bias for the week ahead. Support is currently in place for the pair at 1.1097, 1.0954, and 1.0873. Resistance exists on the upside at 1.1211, 1.1343, and 1.1425.
Ultimately, the week ahead is likely to be all about the coming U.S. economic data and, hopefully, falling political risk from the Trump administration. Subsequently, the U.S. Preliminary GDP and Core Durable Goods Order figures are likely to be the key components in the pair’s near term trend.
