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The main events for this week in the FX market include the ECB decision and eurozone July PMIs.

Here’s what market analysts are expecting and what I’m looking to trade.

Don’t forget to review which factors drove forex market price action last week, too!

Major Economic Events:

RBA meeting minutes (July 20, 1:30 am GMT) – The Australian central bank refrained from making any interest rate changes in their latest policy decision.

It’s worth noting, though, that policymakers agreed to extend its bond-buying program by a couple of months while reducing the purchase amount from 5 billion AUD to 4 billion AUD per week.

The transcript of their meeting should provide more insight on why they decided to make these adjustments and whether or not they’re considering tightening anytime soon.

ECB monetary policy decision (July 22, 11:45 am GMT) – No actual policy changes are expected from the European Central Bank, but many are hoping that Chairperson Lagarde would update their forward guidance on rates.

In particular, expectations are for the ECB to commit to keeping negative rates in place for much longer, as their economy is struggling to deal with the pandemic.

Also, Lagarde might clarify that the end of the PEPP next year could be followed by regular asset purchases, which would basically be another round of QE.

Eurozone PMI readings (July 23, starting 7:15 am GMT) – Another round of declines is expected for the manufacturing PMIs while the services sector could post improvements.

France could print a dip in its July flash manufacturing PMI from 59.0 to 58.1 and an increase from 57.8 to 58.7 for its services PMI.

Germany could see its manufacturing PMI dip from 65.1 to 64.7 and its services PMI climb from 57.5 to 59.4.

This should be enough to bring the region’s flash manufacturing PMI down from 63.4 to 62.6 and the flash services PMI up from 58.3 to 59.4 this month.

Canadian retail sales (July 23, 12:30 pm GMT) – After posting pretty hefty declines in May, Canada’s retail sales report could paint another dismal picture of consumer spending for June.

Headline retail sales are slated to fall by 3.1% while core retail sales could slump by 2.0%, following the earlier 5.7% and 7.2% declines respectively.

Forex Setup of the Week: EUR/GBP

EUR/GBP 4-hour Forex Chart
EUR/GBP 4-hour Forex Chart

Check out this pair cruising steadily inside a falling channel that’s been holding for a couple of months already!

EUR/GBP looks ready for another test of the channel resistance around the .8600 handle, with technical indicators hinting that the selloff could carry on.

The 100 SMA is below the 200 SMA to confirm the presence of bearish vibes while Stochastic is approaching the overbought zone to reflect exhaustion among buyers.

Turning lower would mean that sellers are taking over, possibly bringing EUR/GBP back to the channel bottom near the .8500 handle.

The ECB decision would likely bring a lot of volatility for this pair midweek, and a dovish announcement would likely keep the downtrend intact.

Weaker-than-expected PMI readings due the following day could also add selling pressure for this one, so don’t forget to keep tabs on the economic calendar!