Week Ahead: Trading Outlook

Key Events This Week: March 16th – 20th

EUR: German ZEW Survey March 17th
USD: FOMC Rate Decision March 18th
NZD: GDP March 18th
CAD: CPI March 20th

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

Retail sales came in softer last week in line with a recent spate of weaker US data ( payrolls not included). However, the Greenback forged higher and tested the 100 leve for the first time in over a decade. The recent move into this price has become very stretched and positioning has decreased, suggesting scope for a pullback here but with the FOMC looming this week and anticipation of the Fed adopting more hawkish language in the removing of “patient”, USD longs look secure.

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

Traded steadily lower last week with the ECB’s QE program sending core and periphery bonds lower and so taking the single currency with them. The break of 1.10 last week has seen the Euro racing towards parity, however, weaker US retail sales granted some reprieve to EUR which managed to claw it’s way back above 1.05. Leveraged players and US corporates have still been sellers last week, though in lighter size and with the FOMC meeting this week, flows are likely to return n favour of more downside as long USD exposure is sought.

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

A congested and direction-less week for JPY having conceded it’s gains on the crosses and remained tightly bound against the Dollar. The Japanese economy is signalling early signs of reflation which would likely limit further BoJ action. The Nikkei closed over 19,000 for the first time since April 2000 and demand at these levels is still strong. With the increasing need to maintain hedging ratios as Japanese stocks soar, USDJPY is likely to remain strongly supported.

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

With the BoE having recently revised down their 2015 inflation outlook we have seen another aggressive down week for GBP which plummeted down through 2013 lows. UK Data has disappointed and with political risks looming in the run up to the election in May, the UK currency is likely to remain pressured. Added to domestic uncertainty, the USD rally looks set to continue victimising GBP into this week’s FOMC meeting with anticipation of hawkishness.

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

Another negative week for the Canadian currency, especially so against the Dollar which rose to it’s highest levels against the currency since 2008. The BoC appear more Hawkish in having recently taken any near-term rate cuts off the table however there is definite room for further CAD downside to improve the country’s competitiveness.

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

Having continued it’s losing streak and broken YTD lows against the Dollar, the AUD saw a quick bounce on the back of weaker US retail sales. If there is to be a pulllback in this USD rally then high-beta currencies such as AUD would be obvious beneficiaries. RBA minutes will be of key importance and any dovishness will see AUD resume it’s downward trading trajectory.

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