There will be a lot of interesting events in the United States this week. On Tuesday, a significant report on orders for durable goods will be released. The recent reports have surprised the market greatly, and I do not exclude that this time, the figure will be intriguing as well. Market expectations are very negative – the decline in order volumes may range from 4% to 4.8%. However, there is good news for the dollar – any reduction, even less than expected, will prompt a positive market reaction and strengthen the American currency.
I want to emphasize right away that the EUR/USD and GBP/USD instruments are currently trading differently, which happens quite rarely. Therefore, the impact on GBP/USD may be weaker. More precisely, within one day, the GBP/USD instrument may show a more significant movement, but this movement will affect the overall trend much less. For the EUR/USD instrument, where sellers prevail, any report from the United States will have more significance. The market should use strong statistics from America in favor of the dollar.
On Wednesday, the GDP report for the fourth quarter will be released in the second, interim estimate. Any changes compared to the first estimate may not be perceived by the market at all. The market will wait for the third, final estimate to draw final conclusions. However, even a value below 3.3% may not disappoint market participants so much, as it is still a very strong economic growth.
On Thursday, the most important report will be the Personal Consumption Expenditures (PCE) Price Index, as it has a direct impact on inflation. The higher this index turns out to be, the better for the U.S. dollar, as inflation may decrease more slowly or not decrease at all. Other reports of the day are unlikely to interest traders.
On Friday, the most important will be the ISM Manufacturing Purchasing Managers' Index (PMI), which may slightly increase to 49.5 for February. I believe that the growth may be even stronger, so the dollar may have a favorable background. Throughout the week, I see many more events that are likely to support the U.S. currency.
Wave pattern for EUR/USD:Based on the analysis of EUR/USD, I conclude that the formation of a bearish wave set continues. Wave 2 or b has taken a completed form, so I expect the continuation of building the impulse downward wave 3 or c with a significant decrease in the instrument. Currently, another internal corrective wave is being formed, which may end soon. I consider only sales with targets around the calculated level of 1.0462, corresponding to 127.2% Fibonacci.
The wave pattern of the GBP/USD instrument still suggests a decline. Currently, I am considering selling the instrument with targets below the level of 1.2039 because wave 2 or b cannot last forever, just like a sideways trend. A successful attempt to break through the level of 1.2627 became a signal for sales. However, at the moment, a new sideways trend is also observed with the lower boundary at the level of 1.2500. This level is currently the limit for the decline of the British pound. Wave 3 or c of the downward trend has not yet begun.