Last week we had two significant news in the financial markets. The Bank of England cut its key interest rate after more than seven years and expanded its asset purchase program while U.S. jobs report surpassed by far expectations raising the dollar. Contrary, this week is expected to be quieter. Currently, the BoE interest rate stands 0.25% from 0.50% before and the asset purchase facility at £435B from £375B in an effort to bolster the economy and minimise the risk of post-Brexit recession. The U.S. ended the week broadly higher following the optimistic surprise of the non-farm payroll report. The U.S. economy created 255K jobs in July, smashing expectations of 180K. The average hourly earnings came in at 0.3% versus 0.2% forecasted mom while the unemployment rate remained unchanged at 4.9%.
Next week has a quieter economic calendar than the one just past. The RBNZ will haves its interest rate decision while the U.S. retail sales for July and Eurozone’s preliminary GDP growth for Q2 will be released.
[B]Monday [/B]is very quiet in terms of economic releases. During the European morning, Eurozone’s sentix investor confidence for August will be out. At the noon, the Canadian building permits for June will be released and thereafter we turn to U.S. labor market conditions index for July.
On [B]Tuesday[/B], the UK industrial and manufacturing for June are coming out. The industrial production is expected to have increased 0.1% mom in June from a drop of 0.5% before while the manufacturing production is forecasted to contract 0.2% from a slump of 0.5%. In U.S., the wholesale inventories for June will be released as well as the IBD/TIPP economic optimism for August and the API weekly crude oil stock. Overnight, traders will keep a tab for the Japanese machinery orders for June and the domestic corporate goods price index for July. The Australian Westpac consumer confidence for August will be released and a while later, the RBA Governor Glenn Stevens will give a speech.
On [B]Wednesday[/B], there is no significant European news during the day. In United States the MBA mortgage applications will be released. Also, the JOLTS job openings survey will reveal the job vacancies of June. The monthly budget statement will summarize the financial activities of the previous month with the budget of June being $6B. Afterward, the attention will be turned to New Zealand where the RBNZ will announce its interest rate decision, followed by a press conference and the publication of the monetary policy statement. The day is finishing with the UK’s housing price balance for July and the Australian consumer inflation expectations for August.
Limited news on [B]Thursday [/B]in both European and Asian sessions. France’s and Italy’s inflation rates are coming out while in U.S. we expect the weekly jobless claims and the import, export indexes for July. On the same time, the Canadian new housing price index for June will be released. In New Zealand, the retail sales for Q2 and the business PMI for July will be released, a day after the RBNZ policy meeting.
On [B]Friday [/B]morning, the German inflation rate for July is anticipated to remain unchanged at 0.4% yoy and 0.3% mom while the GDP growth estimate for the second quarter is expected to show a small increase of 0.2% to 1.5% compared to the year before, contrary to the month-over-month figure which is forecasted to come in at 0.3% from 0.7% the previous quarter. June’s industrial production is predicted to show an increase of 0.4% mom from a drop of 1.2% before. Going to U.S., the retail sales for July are forecasted to rise by 0.4% mom, slightly less that June’s increase of 0.5% while the retail sales ex-autos by 0.2% from a rise of 0.7% before. The producer price index for July is also coming out. The flash Michigan consumer sentiment is expected to show improved optimism in August of 91.5 from 90.0 before. Business inventories for June will be released as well.
[B]EUR/USD – Technical Outlook[/B]
The world’s most traded currency – the EUR/USD – plummeted 0.8% during last week and recorded a negative candle, falling down to 1.1040 price level. It has been a quiet week for the euro because August tends to be a dull month for the Eurozone. Currently, the price is trading below the 50-weekly SMA which is a very strong obstacle to surpass above it.
From a technical point of view, the currency is moving towards to the 1.1120 strong resistance level which coincides with the 50-daily SMA. Over the last days, on the daily chart, the 50-SMA had a bearish crossover with the 200-SMA which is a bearish alert for the traders. On the other hand, on the 4-hour chart the 50-SMA had a bullish crossover with both 100-SMA and 200-SMA which is a bullish signal for the short-term traders. In addition, the MACD oscillator is following a negative territory with some weak momentum. The Relative Strength Index (RSI) indicator continues to follow a downward path but is sloping upwards and is approaching the 50 level. Our suggestion is that price will challenge again the 1.1120 barrier and then will fall until the 1.1070 support level or moreover until the 1.1030 level. An alternative scenario is a break above the 1.1120 price level which will expose the pair until the 1.1160 resistance level or further to the 1.1200 psychological level.
[B]GBP/USD – Technical Outlook[/B]
The GBP/USD pair edged sharply lower during last week, following the aggressive sell-off from the 1.3170 strong resistance level. The pair plunged more than 2% last week and dropped below our suggested entry level. The price fell below our second target at 1.3070 (see here the technical analysis: GBP/USD We May See a Drop at 1.3000) over the Bank of England’s policy announcement.
The technical structure remains bearish to neutral, with the pair meeting some short-term buying interest until the 1.3100 psychological level. A successful break above the aforementioned obstacle will open the way for the 1.3170 resistance level which overlaps with the 100-SMA and 50-SMA on the 4-hour chart. On the other side, a penetration below the 1.3070 price level will expose the price until the 1.3020 significant support level. Furthermore, on the 4-hour chart, technical indicators are following a negative territory whilst on the 1-hour chart both of them are rising and they are approaching their mid-levels.