The Week Ahead: Trading Outlook

Key Events This Week: May 11th – 15th

GBP: BoE Asset Purchase Target & Rate Decsion Monday, BoE Inflation Report Wednesday
EUR: German GDP, EuroZone GDP Wednesday
USD: Advance Retail Sales Wednesday, University Of Michigan Confidence Survey Friday

USD Index Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bullish

Another negative week for the Greenback last week which suffered widespread losses against the majors once again. USD bulls had hope to regain some positive momentum but a slight miss in the NFPs dampened the fire once again with the March revision of job growth to 85k seeing the worst monthly figure since June 2012. Although the data missed, it came in strong enough to stem the USD leak we have seen and the Index is clinging to support at the 95 handle. Retail sales & consumer confidence will be closely watched on Friday, retail sales have missed recently but consumer confidence has improved which  has created difficulty in interpreting economic strength from these figures.

EURUSD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish

Another positive week for the single currency last week which broke higher through the April high to challenge the 1.14 handle. Still benefitting from the unwinding of USD long Euro short positioning, the muted NFP number keeps EUR bulls in the drivers seat for now. However, the EuroGroup Fin-Min meeting on Monday threatens the Euro’s trading outlook as concerns around Greece weigh once again. German & EuroZone GDP are the key data risks this week. Another strong German GDP print should support the currency but there are fears of a lower than expected number.

GBPUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish

Last week was another big week the UK currency which began in the shadow of uncertainty created by the looming UK election. However, the British Conservative party were returned to parliament and this was perceived as widely bullish by market participants, sending the GBP back up to April highs where it is currently stalled. BoE rate decision and Inflation report are the key data risks and the BoE members comments are especially important as this is the first time we will hear their views on the economy since the beginning of the election embargo placed on UK civil-servants. Governor Mark Carney will be speaking after the Inflation Report, which will be heavily scrutinized.

USDJPY: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish

A choppy week for the Japanese Yen last week which saw initial strength early in the week, but mostly conceded gains into the Friday close and is still down sharply against EUR & GBP. BoJ lowered it’s inflation outlook signalling the need for more stimulus which will weigh on the currency. Price remains trapped in the consolidation range just off highs.

AUDUSD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bearish

Starts the week just off April’s high print following the Aussie’s surge on the back of an RBA rate cut of 25bps which left many players wrong-footed. Unemployment rate came in slightly higher than expected and flows remain choppy though Carry demand should continue to support AUD in the near term. China’s central bank cut its benchmark lending rates by 25 bps to 5.1% on Sunday, which should also lend support to the Australian currency by boosting the Australian export market.

USDCAD: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks) Bullish

Having broken down through the range we have traded since mid January, we are now  establishing a new range with 1.1950 level acting as support. Canadian Unemployment rate came in in-line but net change in employment missed. Concerns about the Oil price induced damage to the Canadian economy persist and should see CAD lower over the medium term as USD strength resumes.

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