• Spotted with double bottom
  • Manages to hold the 20Dsma

The cross probably formed a base around 0.8240 levels manages to hold the 2Dsma and spotted with a double bottom. All these factors favor to bulls again ahead of the June UK inflation and ECB’ policy decision on Thursday.

The brand new week wraps with high impact macro events either side.

UK’s economic calendar is offering June inflation, May unemployment rate, and June Claimant Count rate. June retails scheduled on Thursday and July PMI readings on Friday.

EURO-Tuesday,  July German ZEW Economic Sentiment, and ZEW Economic Sentiment. Forecast 9.00 vs 19.2 and 51.8 vs 54.5

Wednesday- European Union May Trade balance.

Thursday- ECB interest rate announcement followed by press conference. Forecast rates remain unchanged. It is widely expected no change in policy in Thursday’s ECB meeting.

“Thursday’s ECB meeting is unlikely to bring any new policy decision,” says Marco Valli, Chief Eurozone Economist for Italian lender UniCredit.

Friday- July Flash PMI manufacturing and services of France, Germany, Italy and European Union.

Market participant’s forecast , June UK inflation is expected to remain muted at 0.2%. UK inflation remains below BOE’s 2% target. Some of the analysts forecast the consumer price index might jump to 0.4% slightly up from 0.3% gain in May.

HSBC has pencilled in CPI at 0.3% year-on-year and 0.1% month-on-month in June. The bank said petrol prices were up 2.3% in June, reflecting pre-Brexit and pre-sterling fall data, but the retail goods sector continues to have weak pricing power.

“So food and clothing prices may well fall again,” HSBC said.

“The broadly poor weather over the spring and summer months of 2016 have distorted demand for clothing, keeping a lid on prices.

“However, June is the last month of data taken prior to the referendum. Thereafter, we expect inflation to pick up.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The contribution of motor fuel prices to CPI inflation likely rose by about 0.4 percentage points in response to a 2.1% month-to-month rise in pump prices, reported by Belfast Telegraph.

Technical view: The cross is trading at 0.8375 with 0.30% gains on Tokyo session. It is widely expected no change in policy in Thursday’s ECB meeting. The euro remains neutral against the greenback and higher against the pound. The pound erased earlier weekly gains post-Haldane statement.

Trading support finds at 0.8320, 0.8240 and 0.8180

Resistance seems at 0.8420, 0.8485 and 0.8580

The selling accelerates below 0.8290 but accelerates only below 0.8240 levels.

Review: In Friday’s article, we forecast 0.8400/0.8420 when the price was trading at 0.8345 levels. The cross made high at 0.8415 and changed the direction.

Forecast: Ahead of the macro events between 0.8420 and 0.8470 supply zone remains in play. Further retracement would expect if settles above these.

Alternatively a daily close below 20Dsma accelerates the downward retracement to 0.8200, 0.8160 and 0.8100 levels.