Week Ahead: Trading Outlook

Key Events This Week: March 30 – April 3rd 

EUR: Eurozone CPI March 31st March, PMI April 1st, Account of Meeting April 2nd
GBP: Q4 GDP March 31st
USD: Payrolls Report April 3rd
JPY : Q1 Tankan March 31st
CAD: January GDP March 31st

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

Having fallen for the first half of the week on softer data, USD managed to stage a midweek resurrection and climb back to the weekly opening price as risk aversion kicked in seeing US Treasuries well bid. The softer data in line with last week’s dovish FOMC could see the USD lull continue a while longer but growth is expected to pick up soon and we are ever nearer to a rate hike, so over the medium term, USD strength should prevail. All eyes on Friday’s NFP’s

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

Conversely to the Dollar’s story of a mid week comeback , EURUSD took a beating into the second half as longs were liquidated on the Dollar rebound. Concerns remain over Greece and elections in Europe are presenting a fragmented political picture which could manifest itself in many country’s national elections this year. This political uncertainty will not support EUR. Inflation data eyed along with ECB meeting minutes.

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

Another positive week for the Japanese currency which has benefited greatly from market’s risk aversion driven by uncertainty in the Middle East and equity market valuation. Accompanying this risk aversion inflow have been signs of reflation with wages picking up. The USD rebound weighed heavier on EUR than JPY due to JPY’s safe haven status. Medium term picture is still for Dollar strength to re-emerge

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

A low risk appetite is causing a reduction of investor inflows into the UK, keeping the currency weak. CPI printed a low of 0.0%Y highlighting the increasing risk of the UK dipping into deflation over the coming months. While this supported retail sales, we could see a shift in sentiment from the BoE. This coupled with the uncertainty surrounding Britain’s farcical political landscape should weigh on GBP. GDP data eyed this week.

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

The rebound in oil prices this week, driven by the escalating conflict in Yemen, saw commodity currencies rally, with the Canadian currency a grateful beneficiary. There is still the issue that loans made to the oil sector could come back and bite the Canadian banking sector and even with the prospect of US economic growth supporting the country, USD still remains the stronger buy. CAD GDP data eyed this week.

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

Having rallied early in the week driven by rebounding oil prices, the Australian currency fell late into the week as the Dollar rebounded. Overall the picture for the AUD remains that USD strength will re-emerge and see the currency fall once more in line with the longer term downtrend. Focus shifts towards next weeks RBA meeting.

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