Week Ahead: Trading Outlook

Key Events This Week: May 18th- 22nd

GBP: CPI Tuesday
EUR: German ZEW Survey Tuesday
JPY: GDP Wednesday
USD: CPI Friday
CAD: CPI Friday


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

Dollar bulls still not getting any reprieve as the data continued to disappoint last week causing a further reduction in longs and seeing another week of weakness against the majors. Markets are heavily entrenched in the “wait-and-see” mindset now regarding US data with any positive figures likely to spur some volatile moves. US CPI this week is next in the firing line and a miss will further delay rate-hike expectations seeing more USD weakness.

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

Another solid week for the single currency. We saw price punch through last week’s highs to challenge the 1.14 handle as US retail sales failed to reignite the USD bulls, with the continued rise in European yields adding support also. German GDP came in slightly below forecast whilst CPI came in slightly above and EuroZone GDP came in in-line. Again last week we saw EURUSD’s rise a case of benefiting from USD weakness rather than fresh EUR strength.

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

Weakened against the majors but still remaining firmly range-bound against the USD with some initial strength as improvements in Japan’s external account surplus prompted USDJPY selling. This range is likely to remain so long as we don’t see any more easing from the BoJ or any data surprises out of the US.

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

Continued to strengthen last week as the UK benefits from investor flow on the back of the (Business friendly) Conservative party’s majority return to Government. We saw some GBP selling as the BoE cut its 2015 growth forecast from 2.9%-2.5% but a surprise increase in service sector wages helped support the UK currency with the first rate increases set to take place in Q2 2016. This week CPI data is the headline event bringing the risk that we dip into deflation for the first time since 1989 which would considerably undermine GBP’s recent strength.

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

A whipsaw week for the Australian currency as we saw price rise through highs only to be met by strong macro fund supply, sending price right back down. It’s high beta status make it a favourite for short USD plays and markets are pricing out expectations of a further RBA rate cut this year. As with EUR, upside room appears limited to tactical advancement only, in lieu of resumed USD strength. A slowdown in Chinese growth also hampers the Aussie’s trading outlook.

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

Canadian data has continued to upstage that of it’s famous neighbour and with the BoC on hold, flows have been supportive again this week. The distressed oil sector in the country remains an issue, Canadian CPI is next on watch and will be interesting to see if again we see Canada come in above the US, which would push price through the recent 1.1918 low.
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