The Week Ahead: Trading Outlook

Key Events This Week: January 5th – 10th:

Tuesday: AUD Trade Balance GBP Services PMI USD ISM Non Manufacturing
Wednesday: EUR German Unemployment Change Eurozone Core CPI USD ADP Employment Change, FOMC Meeting Minutes
Thursday: EUR Eurozone Retail Sales GBP BOE Interest Rate Decision USD Initial Jobless Claims
Friday: EUR German Industrial Production GBP Industrial Production, Manufacturing Production, Visible Trade Balance USD Non Farm Payrolls

USD Index

USD continues its relentless march higher, breaking out from its multi year basing pattern and now targeting key resistance at the 94 level – the Index printed a nine year high over night. The market looks set to continue its core theme from the back end of 2014 with a keen focus on the plain policy divergence that is apparent between the focus of the FED on the potential for normalising monetary policy, while the rest of the major central banks around the world either consider or continue to implement monetary easing measures.

EURUSD

The EURUSD printed a nine year low overnight, doveish comments from ECB president on price stability hurt the euro he further commented that the ECB was ready to take bolder steps on expanding monetary stimulus early 2015, this coupled with Chancellor Merkel’s comments regarding the potential of a Greek exit from the Eurozone saw the Euro briefly take out 2010 lows in early Asian action. Eurozone manufacturing PMI  at 50.6 in Dec, missed market expectation and the weak data keeps the pressure firmly on the ECB.

USDJPY

USDJPY was relatively steady overnight as the market focus’s on the Euro. Dollar strength continues to be the key driver for now and brought the pair as high as 120.74 on Friday, if the market can push through Fridays highs the path seems clear for a retest of the seven-year high at 121.84, printed on 8 Dec 2014. Non farm payrolls due later this week will likely prove the catalyst for the next directional phase in the JPY

GBPUSD

GBPUSD fell to two year low overnight trading in sympathy with the EUR, this is a bad start to 2015 for sterling. Last weeks Manufacturing PMI disappointed the market at 52.5 vs 53.7 exp, the market has significantly wound back their expectations for the BOE’s rate hike to 2016 amid weak data and the political uncertainty of the looming general elections in the UK. BOE rate decision will be eyed this week along with Trade Balance data.

AUDUSD

AUDUSD touched five and a half year lows overnight in Asian trade as the broad USD strength and spike down in Globex crude prices weighed heavily on the pair at the Asian open. Bounces in the AUD have been sold into since late 2014 a theme which looks set to continue in early 2015 as the RBA Governor would like to see a 0.75 handle and the AUD remains weighed upon by the negative effect of weak China data. China CPI data will be eyed this week along with the domestic Trade Balance.

USDCAD

The USDCAD stormed higher last week recording five and half year highs overnight, the continued weakness in crude prices coupled with the broad USD strength are weighing heavily on the CAD. Like other majors the CAD is suffering from a pull back in domestic data performance which only serves to highlight the attractiveness of the USD. With Crude on the back foot and domestic data softening it is fair to expect more upside to come in the USDCAD.

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