The Week Ahead: Trading Outlook

Key Events This Week: March 2nd – 6th

USD: Personal Consumption Expenditure Mar 2nd, ISM Non-Manufacturing Composite, Fed Beige book Mar 4th, Non-Farm Payrolls, Unemployment rate Mar 6th
EUR: Euro-Zone CPI Mar 2nd, ECB Rate Decision Mar 5th, Euro-Zone GDP Mar 6th
GBP: Boe Rate Decision, BoE Asset Purchase Target Mar 5th, BoE/GfK Inflation Next 12 Months Mar 6th
CAD: Quarterly GDP, GDP YoY Mar 3rd, BoC Rate Decision Mar 4th
AUD: RBA Rate Decision Mar 3rd, GDP Mar 4th

USD Index: Short Term ( 1 – 3 day ) : Neutral – Medium Term ( 1 – 3 weeks ) Bullish

The greenback broke higher this week. Comments from the Fed’s Yellen suggest that the much disputed “patient” could be removed from the Fed’s statement in March and as such have fuelled some market expectation of a possible June lift off. Growth differentials are still supporting Dollar strength at these levels.

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

Another very contained week this week as the risk surrounding the situation in Greece has subsided somewhat this week with an agreement in the works to extend funding for several months. With that situation appearing under control for now, markets focus is turned once again to the ECB, with purchases set to begin in March and with the ECB meeting coming up next week. There are some initial signs that the easing already seen as translated into growth but when compared with US growth and alongside the monetary policy differentials the EUR looks set to continue its downward path.

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

Saw some strength this week before retreating back into mid range on month-end flows. Over the near term the UK currency should see support from relative rate differentials between it and the Euro area bringing strength to GBP crosses. However over the medium term and especially against the USD the outlook is more negative with growing political risks threatening to reduce FDI inflows.

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

With data supportive of a Fed move and a rebound in US yields attracting Japanese investor and importer community, JPY is likely to weaken from these levels. The anticipation of a Fed move is likely to pressure JPY over the medium-longer term as a funding currency and as such we expect the USDJPY consolidation to unwind to the upside.

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

Still chopping around in its multi-week range currently , a period of consolidation in a longer term downtrend. Whilst the RBA might not necessarily cut again at the next meeting, soft growth and commodity sector investment suggest this would be a pause in the easing cycle rather than an end to it and with clear monetary policy differentials with the US, the downtrend is likely to continue.

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

Although the BoC’s Poloz’s speech spurred rate cut expectations to be priced out of the Central Bank’s next meeting, the Boc will likely retain it’s dovish tone as oil markets remain volatile. Should oil prices stabilize, low prices still threaten Canadian growth and should weaken the currency.

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