[B]EUR/USD Is likely to break below its ascending trendline[/B]
The U.S. dollar made a partial recovery against the euro after the release of the poor NFP report two Fridays ago and is now trading back below the psychological level at 1.1300. In the coming days, there will be plenty of U.S. macroeconomic indicators and economic events that will draw significant market attention (see the Fundamental part).
The EUR/USD pair failed to overcome the 1.1415 region and plunged below the 50-SMA on the daily chart. This decline, from the 1.1415 region, could have also been fueled by profit taking ahead of the significant Federal Reserve interest rate decision, as well as the FOMC economic projections accompanied by a monetary policy statement due on mid-Wednesday. From a technical point of view, the trend remains upward based on short term charts and will require a larger decline in order to begin to put downward direction, given that in the daily chart, the price is above the ascending trend line which started back in December 2015. In addition, the momentum indicators have turned slightly lower but are unable to confirm a downward breakout, yet. The immediate support for the pair will now be the 1.1215 barrier, before we get down to the ascending trend line and the psychological zone at 1.1060 – 1.1100. The 200-SMA is also ready to provide a significant support to the price action, near the aforementioned zone, in a case of a pullback, which is the possible scenario for now. Having said that, volatility is expected to pick up this week and traders should be cautious for false breakouts.
[B]GBP/USD Next Target 1.5000[/B]
The GBP/USD pair closed in the red for a second consecutive week, plunging more than 2%. Technically, the pair’s latest decline could have also been fueled by profit taking ahead of the 23 June vote. The UK will hold a referendum on June 23 to decide if it will stay in or leave the European Union.
The pair keeps falling in early trading, with the pair to plunge below the significant zone of 1.4300 – 1.4330, as well as below the ascending trend line which started back in February. The upcoming week will be critical for the British pound, with several important economic indicators coming from the UK, including the CPI figure and retail sales, all for May. In addition, the Bank of England will have their policy meeting in early Thursday. The UK will also publish its employment data for May, whilst the looming referendum will also take a huge roll in Pound’s volatility. As it is, I think we need to see further confirmation before determining that the bias in the market has changed from bullish to bearish. There is a clear battle going on below the 1.4300 level, but it’s not clear at this stage who has the upper hand, the bulls or the bears. The 50-SMA and the 200-SMA on both the daily and the 4-hour charts are continuing to provide a significant resistance to the price action whilst the technical indicators have turned lower. I would be fairly neutral though on any directional move and we could yet see the pound come under further pressure, with much depending on the Brexit polls, with extreme wide moves becoming the normal ahead of the EU referendum.