Where To Put Your Money In Forex This Week
The Pound remains in a strong uptrend against the US Dollar since late September last year, however, the rising channel that contained the pair for several months is now being tested once again.
The UK vaccination campaign has been fast-paced thus far, as more than 26 million people have already received at least the first jab. Yet frictions between the UK and the EU may undermine the smooth continuation of vaccination efforts. The European Union is allegedly preparing to withhold shots from entering the UK by rejecting AstraZeneca’s export authorization until the drug manufacturer meets its obligations for delivering the necessary vaccines to the 27-nation bloc.
If this scenario materializes, it will be a big blow to an already precarious EU-UK relation and will likely have an effect on their respective currencies. It could further mean that the US Dollar will continue to gain momentum against both the EUR and the GBP. Add to all that some important speeches and testimonies that are scheduled for the week ahead, and we may see significant moves on the Forex market.
Key Events for the Week Ahead
The first notable event of the week is a speech delivered by Fed Chair Powell at an online event organized by the Bank for International Settlements. It’s scheduled for Monday, March 22 at 1:00 pm GMT but the impact is not expected to be massive.
Tuesday, March 23 at 2:00 pm GMT, Fed Chair Powell, and Treasury Secretary Janet Yellen will testify before the House Financial Services Committee on the CARES Act. A day later, at the same time, they will both testify on the same topic, but this time before the Senate Banking Committee. These testimonies are likely to generate US Dollar volatility, thus caution should be used.
Bank of England Governor Bailey will participate in a panel discussion Thursday, March 25, starting at 9:30 am GMT. The topic will be central banking innovation and the event is organized by the Bank for International Settlements. The week finishes with the Euro Summit, which starts Friday; important figures from the EU countries will meet to discuss the role of the Euro and how to strengthen it. The exact impact of these events cannot be accurately anticipated but volatility is often experienced when heads of central banks speak.
Chart Analysis – GBP/USD
The pair is still stuck inside the rising channel but there are lots of bearish signs on the horizon, which could mean that it’s preparing for a breakout. A timid upside push was rejected twice at 1.4000 resistance, creating a double top, which is known as a strong bearish formation. Furthermore, both the MACD and RSI are moving south, adding to the probability of a bearish break of the channel.
On the other hand, price is facing a confluence zone created by the lower boundary of the channel and the 50-period moving average (blue line). If this support zone is breached, the pair will be headed towards the next support, located at 1.3700. Even if some rejection is seen at the current level, the bias remains bearish as long as price remains below 1.4000.