Last week's overview, this week's key events

Source: Dukascopy Bank SA
Last week Mario Draghi proved once again that a lack of action and talking down the currency is an effective strategy. The shared currency remained almost unchanged over the period, with a slight reaction to a release of services PMI, retail sales and a bunch of statistics from Germany. The Euro index lost more than 0.5% following the ECB Press Conference, posting the sharpest drop since March 2014. The president claimed that officials are ready to act in June and also stepped up his expressions of concern about the strength of domestic currency. Analysts now give around 50% possibility the ECB will slash the main refinancing rate and the deposit rate in June. In theory, Draghi's comments and disappointing statistics from Europe's powerhouse should provide a long-term bearish bias for the single currency. Moreover, the most traded currency pair has no option but to decline, otherwise, the ECB will pull the trigger sooner or later.

Keeping in mind extremely bearish market sentiment (63%), traders are likely to push the EUR/USD pair to weekly and daily support at 1.3732 in the nearest future. This week, on Tuesday, German ZEW Institute is likely to show deterioration in the economic sentiment, and taking into account the persistently weak fundamentals from Europe's largest economy in recent weeks, the report can surprise markets to the downside. Additionally, this week's main highlights will be inflation and GDP data on Thursday. Any disappointment will provoke a massive selloff of the single currency, while an improvement will have a muted impact. Therefore, this week's outlook will be bearish, with the key level for short traders being located at 1.3678– 200-day SMA, recent low and a weekly S3.

During the last several weeks, vast majority of fundamental reports from the U.K. were having a muted impact on the currency. Moreover, despite the release of services PMI and the BoE meeting, the Sterling index lost only 0.05% over the week. Nonetheless, this week's news release from the U.K. labour market can bolster the case Mark Carney should consider tightening the monetary policy sooner than expected. The number of jobless people is likely to continue falling, while unemployment is projected to hit 6.8%. The improvement will mean the slack is decreasing and with inflation being at the same pace with wage growth, the economy is likely to return to its full capacity soon. A move above 1.6942 will clear the way for 1.70-mark, represented by a recent high and weekly R2.
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