The Week Ahead: All Eyes On Thursday's ECB Meeting

With the markets still reviewing the aftermath from Jackson Hole and an exepected increase in volumes in September, we are expecting next week to set a bit of a tone and hopefully by the end of the week, some direction.

The big thing on the agenda is the ECB meeting later in the week coupled with the press conference on Thursday. Markets are really expecting the ECB to highlight more on the bond buying programme and more on the associated banking licenses.

Prior to this, expect commentary on Spain and the latest bailout rumours (unlikely to do much until after the ECB meeting). All that said, any action is likely to be put on hold until the German Constitutional court ruling scheduled for the 15th of September (although currently, we find it hard to believe that they will completely reject any proposals).

From a fundamental standpoint we think we are more likely to see positives out of the eurozone next week, however, with European market participants out on holiday for most of August, the pick-up in volume could cause some bigger moves. At the moment we think the aussie and euro are slightly overvalued based on the current situation and the fact that there is still no solution (despite all the talk let's not forget there is still no real plan of action, only ideas and comments).

We think the possible resignation of Weidmann is likely to also cause a few issues. That said, the market at the moment seems to value positive news more than negative and therefore we are still Bullish the euro.

From a technical standpoint, August has been rather choppy but overall risk positive. We currently remain set with a tight range on the euro with no-one really willing to push a breakout in either direction during August. September is likely to be far different, that said I wouldn't be surprised to see a bit of downside prior to a push higher on ECB announcements. If the ECB does disappoint the market is likely to punish this hard in September and I would expect us to break the July lows.

Don't forget it is Labour Day in the US Monday so volumes might be light in the afternoon session.

EUR/USD
The euro seemed to reject higher prices on Friday, however, this is a little disjointed with the other risk pairs and therefore could be the result of profit taking as opposed to anything else. Support comes in below at just above the 1.24 level, we could see a move lower before a Bullish resumption.

Key to this will be looking at the consolidation range and watching for breakouts from this. We are currently looking for a drop lower to support around the 1.24 handle then a push higher in this pair. Ideally we are looking for good long entry signals off of the 1.24 mark itself.

GBP/USD
Strong pushed higher on Friday and a strong pin bar on the 4-hour chart. If we can break above the 1.59 handle we could then see a much larger move. Currently we prefer the GBP/JPY long position but the 4-hour signal is relatively strong. A confirmation and break above the 1.59 handle would put us long. Potentially a higher risk set-up would be to take a long position on a retracement towards support on the 4-hour or on another price rejection.
AUD/USD
Technically we are Bearish this pair at the moment, although the counter trend signal on the 4-hour suggests a move higher we would rather wait and see on this pair, preferring ideally a short position from a resistance point. That said with an aggressive move in risk-on trading, we would be unlikely to see this.

USD/JPY
Our dollar-yen strategy holds for range-bound trading, pair dropped lower today with shorts off of the upper blue line playing out well, to continue to the range bound trading we will be looking for long entries a little way above the lower blue line with stops below, although this strategy does require tight stop movement and quick profit targets, make sure you keep to a tight risk:reward strategy if you take these.
GBP/JPY
We still really like this position but would like to see a break and hold above 125.00 handle now. A break above this point exposes a significant potential for much further gains with really good risk reward.
NZD/CAD
Another pin formation pointing to a Bearish resumption in this pair. With a tight stop this will either play out or get stopped out quite quickly. As the NZD will charge on any risk-on trading, these tend to be pretty nice set-ups emotionally.