Week Ahead: Trading Outlook

Key Events This Week: March 23rd – 27th 

GBP: CPI March 24th
USD: CPI March 24th, Durable Goods March 25th
JPY : CPI March 26th

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

The dovish FOMC meeting saw USD longs unwind on Wednesday with the Fed suggesting that the pace of rate-hikes will be slower though data dependant. Softer data recently is turning market expectations back towards a September lift-off and as such there is scope for a deeper USD retracement. Over the medium term however the USD will continue to strengthen as rate-hikes move closer and any strong data will add acute strengthening.
EURUSD: Short Term (1-3 Days):Neutral– Medium Term (1-3 Weeks) Bearish

Saw a firmer week with USD long short covering providing a bounce into the dovish FOMC meeting whcih saw EURUSD spike higher by over 400 pips only to reverse immediately. Ending the week in positive territory there is a chance that we could see some short term reprieve in EUR downside with signs of European reflation and USD positioning adjustment, but over the medium term the ECB’s QE program will lower yields in Europe and take EUR lower once more.

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

Conceded all gains made on the FOMC release and indeed ended the week pretty much flat. There is some scope for JPY to benefit over the short term with the materialisation of a deeper USD pullback. The BoJ is currently adopting a hand-off approach and there are reflationary signs out of Japan. The Nikkei however continues to push into fresh highs and should see USDJPY supported

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

Ends the week around flat after being subjected to the same FOMC induced whipsaw seen across the USD basket. Any retracement higher in GBP should be viewed as a selling opportunity with recent data coming in soft and political risks stemming from the UK election gaining prominence. There is also a chance that this week’s CPI print will come in weak given that there remains low price rises in the retail sector and wages still aren’t rising in line with expectations.

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

A more positive end to the week for the beleaguered Canadian currency which has been hammered recently due to the decline in oil prices. CPI data came in unchanged YoY but rose 0.4% MoM. Over the medium term, USD strengthening should re-emerge and there is also the prospect that loans made by the Candian Govt to the oil sector could become an issue.

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

Ends just inside positive territory on the back of the FOMC spike. Falling commodity prices have weighed on the Australian currency and should continue to do so as questions grow around global growth. given its high-beta status, AUD should benefit from USD easing over the short term but expect downward continuation medium term and be aware of US data which will create short opportunities on upside prints.

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