The Forex Week In Review

The Week That Was…

Forex markets were closely watching US data again this week with USD bulls hoping for black but landing on red once again. Retail sales came in soft to start the week and we saw a big miss on consumer confidence conclude the bearish tone for the week with the majors continuing their advance against the diminished Dollar.

The BoE held a modest tone this week, cutting their 2015 growth forecast for the UK from 2.9% – 2.5% but remained positive about a rate hike in Q2 2016 which saw the GBP continue with the strength it has enjoyed since the shock UK election result.

Uncertainty continues to loom over the Greek situation which is far from resolved. The latest piece of the saga is that Greece may ask the ECB for emergency funding at the end of May or to delay it’s repayment. Talks and rumours continue to cloud the picture.

Overview

  • USD Dollar bulls still not getting any reprieve as the data continued to disappoint this week causing a further reduction in longs and seeing another week of weakness against the majors. Markets are heavily entrenched in the “wait-and-see” mindset now regarding US data with any positive figures likely to spur some volatile moves.
  • EUR Another solid week for the single currency. We saw price punch through last week’s highs to challenge the 1.14 handle as US retail sales failed to reignite the USD bulls, with the continued rise in European yields adding support also. German GDP came in slightly below forecast whilst CPI came in slightly above and EuroZone GDP came in in-line. Again this week, a case of benefiting from USD weakness rather than fresh EUR strength.
  • JPY Weakened against the majors but still remaining firmly range-bound against the USD with some initial strength as improvements in Japan’s external account surplus prompters USDJPY selling. This range is likely to remain so long as we don’t see any more easing from the BoJ or any data surprises out of the US.
  • GBP Continued to strengthen this week as the UK benefits from investor flow on the back of the (Business friendly) Conservative party’s majority return to Government. We saw some GBP selling as the BoE cut its 2015 growth forecast from 2.9%-2.5% but a suprise increase in service sector wages helped support the UK currency with the first rate increases set to take place in Q2 2016.
  • AUD A whipsaw week for the Australian currency as we saw price rise through highs only to be met by strong macro fund supply, sending price right back down. It’s high beta status make it a favourite for short USD plays and markets are pricing out expectations of a further RBA rate cut this year. As with EUR. upside room appears limited to tactical advancement only, in lieu of resumed USD strength.
  • CAD Canadian data has continued to upstage that of it’s famous neighbour and with the BoC on hold, flows have been supportive again this week. The distressed oil sector in the country remains an issue, Canadian CPI is next on watch.

Key Views

EURUSD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
GBPUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
USDJPY: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish
AUDUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
USDCAD: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bullish

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