Weekly Analysis: World Economic Forum Meetings Start in Davos. Strong Market Impact Expected

EUR/USD

Weekly Analysis: Last week we saw several attempts to move above the resistance at 1.2280 but all resulted in bounces lower. Overall the pair remained consolidation phase, but pressure is mounting for a stronger move.

World Economic Forum Meetings Start in Davos. Strong Market Impact Expected 1

Technical Outlook

It is now clear that 1.2280 is a strong resistance zone, so a break or bounce here will be important for medium term price action. The pair is in an uptrend, so there’s a high possibility of a move above 1.2280 – 1.2300, which would open the door for 1.2500, which is a psychological level (such a move will likely take more than one week). On the other hand, the RSI is showing bearish divergence (price is making higher highs and the oscillator is showing a double top) and this is a warning sign that a deeper move south will follow. If this is the case the first support is located at 1.2092.

Fundamental Outlook

Price action during the week ahead will likely be influenced by the World Economic Forum (WEF) Meetings held in Davos. The meetings will last all week so caution is recommended. Apart from this, the Euro will be affected by the ZEW Economic sentiment released Tuesday, while Wednesday the focus will be on the US Dollar for the release of the Existing Home Sales.

Thursday the ECB will announce the interest rate, which is not expected to change but ECB President Draghi will hold a press conference shortly after and this is usually a reason for high volatility. Friday the most notable release will be the US Advance version of the GDP, which is the main gauge of overall economic performance.

 

GBP/USD

Last week the bulls remained mostly in control and took the pair to a high at 1.3942. However, later in the week price rebounded and approached the previous resistance at 1.3860.

World Economic Forum Meetings Start in Davos. Strong Market Impact Expected 2

Technical Outlook

Although the pair is on an upwards trend, it bounced twice at 1.3942 and the Relative Strength Index is still in overbought territory, which means that we will probably see a move south this week. If 1.3860 is broken, the first potential support is located around 1.3600 but such a long move will need some support from the fundamental side. On the other hand, a break of 1.3942 will take the pair into the key psychological resistance at 1.4000.

Fundamental Outlook

The Pound will only be affected by two major releases this week: the Average Earnings Index scheduled Wednesday and the Preliminary version of the Gross Domestic Product, scheduled Friday. Also Friday, Bank of England Governor Carney will participate in a panel discussion at the World Economic Forum and this could be another reason for increased volatility.

 

Written by: Bogdan Giulvezan

The article above is based on the writer’s 8-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.