Action Insight Weekly Report 8-18-19

An Important Week for EUR/USD as Fed and ECB Easing Expectations Built

Euro ended last week as the weakest one as comments from a top ECB official suggested a forceful easing package to be announced in September. Additionally recession fear in Germany sent 10-year bund yield to new record low. New Zealand Dollar followed as the second weakest on dovish RBNZ expectations. The overbought Yen was the third weakest despite falling yields as it was consolidating recent gains. On the other hand, Sterling was the strongest last week, paring some of recent losses, awaiting the next move regarding Brexit. Dollar followed as the second strongest, mainly because of weakness elsewhere.

The upcoming week could be crucial for the greenback as focus will turn to Fed Chair Jerome Powell's Jackson Hole speech, and FOMC minutes. Euro, will also look into ECB policy accounts and PMIs. These events could decide whether EUR/USD would extend medium term down trend through 1.1026 low. Such a development could drag down the Euro elsewhere, or push up the greenback broadly, or both.

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EUR/USD Weekly Outlook

EUR/USD's sharp decline last week suggests that rebound from 1.1026 has completed at 1.1249, after failing to sustain above 55 day EMA (now at 1.1202). Initial bias stays on the downside this week for retesting 1.1026 low first. Decisive break there will extend the downtrend from 1.2555. On the downside, above 1.1130 minor resistance will turn intraday bias back to the upside to extend the corrective. But in that case, we'd expect strong resistance from 1.1282 to limit upside.

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