An
interesting situation has developed in regard to the EURUSD pair on the weekly
chart. It appears that since early this year the exchange rate has been carving
out what is known as an ascending triangle, as can be seen on the chart above.
This pattern is normally held to signal a breakout to the upside. However, the
accepted wisdom in the Forex marketplace has been that the trajectory for this
pair is down. This is because monetary policy in the US and the Eurozone is on
a diverging path – US Quantitative Easing is a thing of the past, and the next
move there is start raising interest rates, even if the Fed seems to be having
some difficulty in biting the bullet here. In the case of the ECB, exactly the
opposite is the case – QE is only getting into its stride, and the idea of
Frankfurt raising interest rates any time soon is regarded by most as a remote
prospect.
So we would
seem to have a contradiction between the technical and the fundamental. It will
be interesting to see how this plays out.
Economic events this week
There are no
major events, in the way of monetary policy decisions, in the countries of the
currencies that we watch this week. In Japan, there will be the release of BoJ
Monetary Policy Meeting Minutes, but these are not expected to have a big
impact.
Tomorrow,
Tuesday, will see inflation figures in Germany and the UK, and retail sales in
the UK, while on Wednesday the retail sales figures for the US will be
released. These are always closely watched by the market and can cause a
reaction. Then, on Thursday, employment figures in Australia come out, as well
as inflation expectations. The same day sees inflation numbers from the US, and
speeches from a number of Federal Reserve members. Inflation for the Eurozone
as a whole will be out on Friday, as will the Reuters / University of Michigan
Consumer Sentiment Index.
While all
those things are important, they cannot ever take into account the surprises
that can drop, from time to time, from a clear blue sky.
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