GBP/USD Weekly Forecast (28th Jun 2021 – 02nd July 2021)

Fundamental view:

Pound has been trading high against greenback in the past week. GBP/USD as much of the post-FOMC hawkish excitement faded. The recent meeting of BOE provided little in the way of surprises with policy tools left unchanged on the other hand, the outgoing Chief Economist, Andy Haldane, had once again been the only dissenter on the MPC. However, the broader issues with concerns of Irish fishermen’s dissatisfaction with the EU quotas will continue to temper sterling’s recovery moves. Further, a dramatic rise in Britain’s Delta plus covid strain continued to weigh on the cable.

Britain Public Sector Net Cash Requirement on 22nd June and US Markit Manufacturing PMI on 23rd June favored downtrend whereas US Existing Home Sales on 23rd June and Britain GfK Consumer Confidence on 25th June favored uptrend for the pair.

The major economic events deciding the movement of the pair in the next week are US CB Consumer Confidence Index at Jun 29, UK GDP quarterly report, US ADP Nonfarm Employment Change at Jun 30, BoE Governor Bailey Speech, US Initial Jobless Claims, US ISM Manufacturing PMI at July 01 and US Nonfarm Payrolls at July 02.

 GBP/USD Weekly outlook:

Technical View:

Last week’s high was 0.93% lower than the previous week. Maintaining high at 1.4001 and low at 1.3785 showed a movement of 216 pips.

In the upcoming week we expect GBP/USD to show a bearish trend.  The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside. A solid breakout below 1.3774 may open a clean path towards 1.3671 and may take a way down to 1.3558. Should 1.3990 prove to be unreliable resistance, the GBPUSD may raise upwards 1.4103 and 1.4206 respectively. Chart formation of ascending triangle pattern breakout downside in H4 chart favors prospects of a bearish trend. Shooting star pattern formation escalates the expectation for a bearish trend.

Preference
Sell: 1.3886 target at 1.3672 and stop loss at 1.3995

 

Alternate Scenario
Buy: 1.3995 target at 1.4205 and stop loss at 1.3886

EUR/USD Weekly Forecast (28th Jun 2021 – 02nd July 2021)

Fundamental view:

The Euro has bounced rather hard to form a bull candle. Fed bankers remained under the spotlight, although sentiment was the main driver, as rallying stocks underpinned demand for high-yielding currencies. On the one hand, European Central Bank President Christine Lagarde said that the outlook for the euro area economy is brightening as the pandemic situation improves; also adding that economic growth could rebound quicker than expected Adding to it she also said that the ECB will maintain the accommodation policy and that tightening would be premature.

US Current Account on 23rd July and US Initial Jobless Claims 4-Week Average on 24th June favored bearish trend whereas US Existing Home Sales & Europe Consumer Confidence Index on 22nd June and Europe Markit Services PMI & Europe Markit Manufacturing PMI on 23rd June favored bullish trend for the pair.

The major economic events deciding the movement of the pair in the next week are ECB President Lagarde Speech, US CB Consumer Confidence Index at Jun 29, US ADP Nonfarm Employment Change at Jun 30, Europe Unemployment Rate, US Initial Jobless Claims, US ISM Manufacturing PMI at July 01 and US Nonfarm Payrolls at July 02.

EUR/USD Weekly outlook:

Technical View:

Last week’s high was 1.42% lower than the previous week. Maintaining high at 1.1975 and low at 1.1847 showed a movement of 128 pips.

In the upcoming week we expect EUR/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside. A solid breakout below 1.1862 may open a clean path towards 1.1791 and may take a way down to 1.1734. Should 1.1990 prove to be unreliable resistance, the EURUSD may raise upwards 1.2047 and 1.2118 respectively. Chart formation of a rising wedge pattern in H4 chart sets prospects for a bearish trend. Engulfing formation in H4 chart escalates the expectation for a bearish trend.

Preference
Sell: 1.1925 target at 1.1799 and stop loss at 1.1995

 

Alternate Scenario
Buy: 1.1995 target at 1.2117 and stop loss at 1.1925

US data favors Euro

Euro is somewhat picking up bids on the second day heading into Friday’s European session. EUR/USD is encouraging bullish market sentiment and US dollar retreat as bulls. However, it should be noted that the US Federal Reserve (Fed) wishes the traders to study inflation data late on a monthly basis. Fears of the US Personal Consumption Expenditure (PCE) inflation figures confirming the Fed’s hawkish signals, flashed the previous week, keep the US dollar chained ahead of the key data.

Meanwhile France and Germany have suggested inviting Vladimir Putin to a summit with the EU as part of a broader reset of the bloc’s relations with Russia. Biden and Putin met for three hours in Geneva on 16 June, both saying the meeting was worthwhile while airing grievances against each other’s countries. They agreed their officials would meet more often as part of a strategic stability dialogue, and explore the possibility of working on a new arms control agreement.

On the other hand, US President Joe Biden’s ability to deliver on the promised stimulus, despite the small amount of cost and details, initially supported the market sentiment. Following that, the views of German diplomat Peter Almeyer show improvement in EU-US trade relations after a few years of differences. The German economic minister said, “The talks in Washington have shown an opportunity to resolve differences. He also hoped that the United States and the European Union (EU) would be able to resolve the differences on steel and aluminum tariffs by the end of this year.”

In the meantime, the Fed recalls epidemic-led relief efforts for large banks and fears of Govt’s Delta Plus variant explore risk-taking mentality. Adding to it, the lack of key data / events and Australia’s local locks, as well as the EU’s refusal to hold a summit with Russian President Vladimir Putin, pose a risk appetite challenge.

With all the mixed catalysts and US data, the views of central bank policymakers will also be a key factor in following the new impetus. U.S. If the PCE data confirms the positive forecasts, the EUR/USD may reduce its weekly gains.

EUR/USD 4 Hour Chart:

Support: 1.1913 (S1), 1.1895 (S2), 1.1874 (S3).

Resistance: 1.1951 (R1), 1.1973 (R2), 1.1990 (R3).

Amidst this the EUR/USD picks up bids upon U.S. data. We expect bullish trend for EUR/USD.

BOE’s monetary policy impacts pound

Pound picks up bids on the fourth consecutive positive day in Asia.  Monetary policy meeting of the Bank of England (BOE) seems to impact the pound positively.

The Bank of England is about to announce its latest decision on monetary policy on Thursday, June 24. This particular meeting will not include fresh macroeconomic projections, due in August, nor even a speech from governor Andrew Bailey. 

Elsewhere, The MPC is widely anticipated to keep the rates and the current facilities programs without any change. Policymakers already announced the central bank would be reducing the pace of its gilts purchases from £4.4bn a week to £3.4bn back in May, and no other measures will join this one, at least this time. Instead, the focus will be on how the Monetary Policy Committee will react to rising inflation.

As the UK gradually reopened the economy, the consumer price index shot above the BOE’s target. UK’s central bankers have been hawkish as of late, hinting at rate hikes in 2022, which are partially priced in. If Thursday’s statement suggests a possible move in the first half of the year, the pound would likely rally. Attention will also focus on how the committee votes. Back in May and on rates, the MPC voted 9-0 to keep them on hold in May, but about government bond purchases, the result was 8-1, as Chief Economist Andy Haldane vote in favour of reducing bond purchases.

It is worth noting that Haldane is leaving is the central bank after this meeting, which will lose one of the most hawkish members. Also, the central bank is expected to maintain a pinch of caution due to the uncertainty related to a possible third coronavirus wave in the country.  Nevertheless, policymakers can’t ignore upbeat macroeconomic figures from the second quarter of the year and would need to react to it rather sooner than later. 

On the other hand the U.S. dollar Fed officials are on the timing of a withdrawal of monetary stimulus. On Wednesday, two Fed officials said a period of high inflation in the United States could last longer than anticipated, just a day after Fed Chair Jerome Powell played down rising price pressures.  Flash U.S. manufacturing PMI climbed to a record high in June, but manufacturers are still struggling to secure raw materials and qualified workers, substantially raising prices for both businesses and consumers.

GBP/USD 4 Hour Chart:

Support: 1.3921 (S1), 1.3883 (S2), 1.3844 (S3).

Resistance: 1.3999 (R1), 1.4039 (R2), 1.4077 (R3).

All the catalyst confuse the traders by creating mixed trend for GBP/USD. We expect a neutral trend for GBP/USD.