“Trump Trade” Boosts Dollar, Euro Falls on Dovish ECB
Double Top at 1.1200 Pushes EUR/USD Lower, Support at 1.0800 Targeted
Last week’s price action was mainly driven by the European Central Bank’s decision to cut the rate from 3.65% to 3.40%. This was not a surprise at all but the prospect of further rate cuts will probably continue to push the price lower.
The US Dollar outperformed expectations last week, on the back of a stellar Retail Sales report which showed that Core Retail Sales beat the consensus with a 0.5% reading (expected was 0.1%) and the headline figure came in at 0.4%, much higher than the previous 0.1%. The US Dollar Index (DXY), which tracks the dollar’s performance against a basket of 6 currencies, is currently trading at 103.53 after coming off highs at 103.87.
Cryptocurrencies have been pushed higher by what many call the “Trump trade”. As Donald Trump’s chances increase in the Presidential race, many see this as a positive for Bitcoin due to the candidate’s lenient stance on cryptocurrency regulation. Just a couple of months ago, Trump vowed to make the USA the “crypto capital of the planet”. Let’s see if he keeps his promise once or if he will get back in the Oval Office.
Economic Calendar Highlights
This week is relatively light in terms of economic releases but we have a lot of meetings and speeches from important policy makers. Bank of England Governor Bailey will speak on Tuesday at 1:25 pm GMT. This will be followed at 7:15 pm GMT by a speech delivered by ECB President Christine Lagarde. She will speak again the next day, Wednesday at 2:00 pm GMT and so will BoE Governor Bailey, at 8:30 pm GMT.
The busiest day of the week will be Thursday when a series of PMIs will be released. The French Manufacturing and Services PMIs will come out at 7:15 am GMT, followed 15 minutes later by the same indicators for the German economy. The United Kingdom will release the Manufacturing and Services PMIs at 8:30 am GMT and the United States will end the series at 1:45 pm GMT.
The U.S. Durable Goods Orders will be released Friday at 12:30 pm GMT, followed at 2:00 pm GMT by the Revised UoM Consumer Sentiment.
Technical Outlook – EUR/USD
After the double top at 1.1200, the pair traveled in an almost straight line down; it is now trading at 1.0855 and showing signs of a pullback. A move up would be very normal after such a strong fall but even if it happens, the main bias will remain bearish.
If the current support represented by the long-term bearish trend line is breached, the pair will continue towards the support at 1.0800 – 1.0775. The RSI is oversold, which helps the case for a bullish retracement. However, this pullback should not go past 1.0900; if it does, the pair may start a period of choppy price action.
