Technical analysis for the week (17th to 21st)

The EUR/USD try rally throughout the week, reaching towards 1.15 level. Ultimately, the 1.15 level maintained as vital resistance, therefore if we are able to break on top of there and additionalsignificantly, the market ought to escape towards the 1.20 level. Alternately, it’s not till we have a tendency to get on top of there that individuals have an interest in shopping for this market from a longer-term perspective. After all, we've been in an exceedingly consolidated space for the last three years, and the 1.15 level is that the high of that vary. As a result of this, an escape are vital and mean quite a bit.

Waiting for the escape

If we are able to shut on top of that level on a minimum of a daily candle, than the markets are favorite to be shopping for. Until then, it’s terribly tough and quite candidly, dangerous to try to trade. Alternately, if we have a tendency to break down below the 1.13 level, that is that the bottom of the hammer from the previous week, that ought to send the market a lot of lower, maybe all the way down to the 1.10 level, or maybe higher however, the gap below. Ultimately, the markets are being attentive to the central bank and also the chance of whether or not they will raise interest rates with any style of momentum.

European yields emotional lower however underperformed U.S. treasuries which permit the EUR/USD to bounce from its lows and shut close to the highs of the North yankee commerce session. The yield differential continued to maneuver in favor of the monetary unit, following Yellen’s dovish testimony before of Congress last week which will likely keep the consumed hold until December. Currently the September Fed fund futures contract is pricing in an 8% chance of a move in September. The ECB meeting on Thursday is likely to headline the week, where Draghi is likely to stick to the June script and try to calm tapering nerves. Indeed, the drop in Eurozone HICP inflation to just 1.3% over year in June will add to the arguments of the doves at the ECB and Eurozone spreads are coming in this morning as peripheral bond markets outperform.

The EUR/USD closed at a fresh 14-month high and is now poised to test target resistance near the May 2016 highs at 1.1616. Support on the currency pair is seen near the recent breakout which coincides with the 10-day moving average at 1.1414. The consolidation has created a bull flag pattern which is a pause that refreshes higher.

Traders will focus on the ECB and look for direction from the central bank. Officials have provided conflicting views, but Draghi has been relatively bullish. The ECB is widely expected to be heading for tapering its quantitative easing program at the beginning of next year, although Praet and Draghi are wary of committing prematurely to exit steps and have been instrumental in keeping the QE easing bias in place. That will give Draghi the chance to use the August Jackson Hole central banker meeting to prepare the markets for a reduction in QE, as well as try to stress that policy will remain accommodative, even at reduced QE levels, rather than as the begin of tapering.

China’s gross domestic product multiplied half dozen.9% within the Q2 on a year over year basis matching the results announce within the Q1, in step with the National Bureau of Statistics. The quantity beat expectations of a rise of half dozen.8%. China saw larger than expected trade numbers last week that gave some insight into the GDP report. The economy on a robust footing to satisfy China’s growth target of around half dozen.5% in 2017 that provides policymakers space to take away monetary risks.
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