Fundamental Analysis

On Wednesday the Fed announced that it was ready to take actions when needed in order to stimulate the growth of the U.S. economy. The markets, which are always awaiting money injections, responded with a downside movement.

On Thursday the European Central Bank made some announcements. The markets expected some positive news from The ECB President Mario Draghi who was supported by several European leaders. But Draghi did not meet investors' expectations. His announcements about monetary policy are not of much importance, as they contain just empty declarations with no real actions to be taken. 

European currencies dropped again, followed by the euro decline which touched 1.21 again and now is trading near its 2-year minimum. The pound sterling which recovered its positions also fell heavily, accompanied by the Swiss franc and the currencies linked to commodities, but the last ones dropped down to a lesser extent.

The US ISM services remained unchanged above 52 and 50 points which is still far from sector contraction.

As usual, we recommend waiting for the short term trends. Watch for data to stabilize before taking action on the market. Prices tend to show unpredictable movements in the first minutes after the employment figures release and there is no need to take unnecessary risks with a day ahead.

 

EUR/USD Buy Above 1.2250

 

Yesterday the euro dropped again reaching 1.2138 amid Mario Draghi's announcements supported by several European leaders. However, the ECB President did not meet investors' expectations. His announcements were just empty declarations without any steps to be taken which proved again that nobody knows how to cope with the crisis.

On a technical level, the euro is trading below 1.2250 weekly pivot, offsetting yesterday's losses. Only a close above 1.2250 will indicate the beginning of a new upward trend with the target of 1.2410 which is likely to be unchanged during the next week as well. We, therefore, recommend buying above 1.2250.

The indicators are showing an imminent upward bounce.

 

 

GBP/USD Buy Above 1.5550

 

The British pound is within the range of 1.5770 to 1.54 consolidation. The fact that initially fired up to 1.57 and then ended at 1.55 does not bode well for this market in the future.

Whether it is likely to continue this movement a little longer or not, will be confined within this range.

Therefore, given that now trades below 1.5550 weekly support (W_S1) is likely to close in 4 hours charts above this level. If the pair manages to hold above 1.5551, we recommend buying with objectives in the short term at 1.5730. Our stop loss is placed below the minimum of yesterday.