Both the euro and the yen had roller-coaster weeks against the US dollar amid rising market volatility. What’s next? Here is their view, courtesy of eFXnews: ING Research discusses the USD outlook by looking at the divergence in US yields and the USD performance, and notes the following key points. ” i) this year’s rise [...]
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USDCHF Weekly Forex Forecast – 19th to 23rd Feb 2018
Technical Outlook: The USDCHF daily chart shows a clear bullish divergence after price fell to new lows of 0.9210. The daily Stochastics is currently forming a higher low against the lower low in price. This could suggest a correction on the horizon. Look for USDCHF to retrace back to the resistance near 0.9455. If the resistance level holds, USDCHF could remain consolidating within the current levels. However, a breakout above this level could indicate further gains that could send USDCHF towards 0.9741 level.
Fundamental Outlook: Switzerland will be releasing the trade balance figures during the week which is the only economic data that will be coming out. Focus turns to the data from the U.S. which will see the existing home sales report. The FOMC will be releasing the meeting minutes from January which will give further insight into how policy makers debated at the meeting where interest rates were left unchanged. Flash manufacturing and services PMI figures from Markit will be coming up later followed by the revised UoM consumer sentiment and inflation expectations data.
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USDJPY Weekly Forex Forecast – 19th to 23rd Feb 2018
Technical Outlook: The USDJPY broke down last week as price action posted strong declines after breaking out from the support level formed at 108.43. This downside price action sent USDJPY to test new lows near 105.77. The currency pair managed to post a reversal here with Friday’s price action closing somewhat modestly higher. However, we expect that any near term gains will be capped near 107.32 which marked the 161.8% Fibonacci extension target of the descending triangle pattern. Resistance is likely to send price action to post a reversal. In the event of a failure, expect USDJPY to retest the original support breakout at 108.45 to establish resistance.
Fundamental Outlook: Data from Japan this week is very quiet with only the flash manufacturing PMI figures for February coming out on Wednesday. Previously, Japan’s manufacturing PMI data for January showed that the economy’s industry was surging ahead in full steam. Data showed that manufacturing activity had picked up and this is expected to see in new job creation as well as increased wage growth in the nation. Later in the day, the all industries activity data will also be coming out. The events are unlikely to make an impact on the market this week with the Japanese yen focusing on the broader market sentiment.
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Technical Outlook: The euro currency posted a strong reversal mid-week as price broke past the resistance level near 1.2362 – 1.2331 with strong conviction. The breakout resulted in the EURUSD rising to post a fresh three year high at 1.2550. However, the gains were limited as the currency pair was seen giving up the gains easily. The reversal after posting the fresh high suggests a pullback for the moment. Watch for a modest decline in EURUSD to 1.2362 – 1.2331 region where support could now be established. This could potentially signal a fresh rally in the EURUSD targeting the previous highs of 1.2550 and further. To the downside, if the support fails to hold, watch for a decline towards 1.2070.
Fundamental Outlook: The week ahead from the Eurozone see’s a relatively quiet data period. Most of the events are second tier events and are unlikely to impact the markets much. On Tuesday, the German ZEW economic sentiment data will be a key event to watch for. With the renewed optimism on the Eurozone growth, the data will cover the month of February and will show if businesses remained upbeat on the growth. Later in the week, the flash services and manufacturing PMI numbers will be coming out for the month of February. On Friday, the final inflation figures for the Eurozone will be released. Consumer prices in the Eurozone remained mixed as per the flash estimates. Headline CPI was seen to be weakening while core CPI has managed to rise slightly.
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The AUDUSD has another failed attempt to break above the big psychological number 0.8000. We had a nice reaction lower from this level right into our first level of support 0.7880 which if holds it should provide us with a bounce and hopefully a successful break of 0.8000. Only a break above this big round number should confirm the bullish case.
The stochastic indicator is moving away from overbought territory and as long as it stays above the 50 mark it should confirm the bullish momentum. On the downside we can note the next level of support at 0.7800 which can provide us with another bounce if reached. We can note only two risk events on the Australian economic calendar that have the potential to be the catalyst for some volatility. Monday the RBA Assistant Governor Bullock is scheduled to speech and Thursday we have the RBA Meeting’s Minutes which should provide traders with more details into the RBA’s monetary policy.
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The USDCAD has broken for a brief period of time below the big round number 1.2500 but we managed to regain that level and close above it on a weekly basis. However the broad base dollar weakness may suggest that we shouldn’t but too much weight on the bull side. A break and a daily close below 1.2500 will validate the bearish view and we could see last week low 1.2460 challenged again.
A break below 1.2460 will open the door for a retest of our next important support level 1.2350. On the upside, the 1.2550 is an important resistance level and any rally above it should fade away unless we post a daily close above it. The stochastic indicator is in neutral territory and doesn’t say much about the state of the market. Monday, we have the Family day holiday in Canada so expect low trading activity on this pair. The only notable risk event is Friday’s CPI inflation figures and Wednesday’s FOMC minutes.
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The GBPUSD has managed again to break above the big psychological number and more than just that we manage to post a weekly close above. This suggests that at least in the short term we should see some more bullish momentum. On the upside the first level of resistance comes at the yearly high level 1.4315 but it’s very unlikely it will be retested in the upcoming week. However, on the other side a break and a daily close below 1.4000 can potentially open up the door for a retest of support level 1.3770. The stochastic indicator is in neutral territory coming of off overbought zone so it doesn’t suggest yet that we have extreme conditions in this market.
The UK economic calendar has some risk events that can produce some volatility. On Wednesday, watch the UK unemployment rate which is expected to remain at historic low. On the same day we can note the Inflation Report Hearings which is a high impact new event. Last but not least we have the UK Preliminary GDP figures for the last quarter of 2017 which based on the market consensus is expected at 0.5%.
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