Week Ahead: Trading Outlook

Key Events This Week: August 24th-28th

USD: Consumer Confidence – Tuesday, Durable Goods – Wednesday, Personal Consumption, GDP, PCE – Thursday
JPY: CPI – Thursday
GBP: GDP – Friday
CHF: GDP – Thursday

Overview

  • USD Traders were left disappointed last week as the FOMC minutes failed to produce clear signals that a September lift-off is in store. Growing concern over the situation in China and the added volatility weighed heavily on USD also. Key data this week will need to see strong prints to encourage USD upside into month end.
  • EUR A trinity of aspects created a stronger week for the single currency. The approval of the Greek bailout program in Greek parliament added support. Volatility in global stock markets on the back of the deteriorating situation in China has seen the continued unwinding of EUR hedges as European equity markets sell off, supporting the Euro which also benefited from broad USD weakness. Chinese-led volatility is expected to continue this week driving Euro supportive risk-off flows.German CPI on Friday is key domestic focus this week.
  • GBP The positive CPI print last week spurred aggressive demand in Sterling as traders see encouraging signs of the UK moving nearer to a rate increase, however the Chinese induced equity volatility saw GBP weaken later in the week, though price remained supported against USD. Traders will be watching the UK GDP print on Friday for signs that the economy is improving.
  • JPY Dovish FOMC and global equity market volatility saw increased JPY safe haven demand last week, a theme which is likely to continue. Any US data weakness this week will encourage further inflow to JPY as traders reduce USD long positioning. CPI this week will be key domestic focus.
  • AUD Global risk-off sentiment on the back of the situation in China weakened AUD further last week as concerns grow over Asian FX depreciation. Remained range-bound against USD in light of broad USD weakness. Further USD weakness this week will likely support an AUD rebound though any gains will remain shallow dues to AUD’s correlation with risk appetite.
  • CAD The continued weakness in Oil prices weighed heavily on the Canadian currency last week which was net weaker against USD. No domestic data this week will leave CAD trading outlook based off USD flows and oil prices. With the Canadian economy so badly affected by the drop in oil prices, further declines will spur CAD selling as traders anticipate further rate cuts.
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