Why the Buck may restore traders’ confidence this week

Forex Market Movers: Weekly Technical Outlook

Global Data Highlights

Monday, July 28, 2014

23:30 GMT          Japanese Household Spending and Retail Sales (June)

Last month’s results in these widely followed metrics were mixed as Household Spending fell considerably at a clip of 8.0% and was worse than the consensus expectation, while Retail Sales only declined 0.4%, better than consensus.  The diverging results were staggering and didn’t help either the bullish or bearish narrative in Japan. In response, the BoJ has taken a “wait and see” approach as more data may give it a clearer picture of the April Fool’s Day consumption tax increase.  If both figures show significantly negative, popular opinion may lean toward more QQE and the USD/JPY could find some upward momentum.

Tuesday, July 29, 2014

8:30 GMT             UK Mortgage Approvals (June)

The market is looking especially closely at mortgage data as it weighs the prospect of a housing market slowdown in the UK, delaying a potential rate hike from the BOE. But the market seems to be in a fairly optimistic mood as it is forecasting mortgage approvals for June to jump to 63k from 61.7k. Consumer lending is also expected to jump to GBP0.8bn from GBP0.7bn, while mortgage lending is expected to drop a touch to GBP 1.9bn from GBP 2.0bn. If data beats expectations then this could give the recent sell off in the pound some respite.

1:00 GMT             New Zealand ANZ Business Confidence (July)

In the wake of the Reserve Bank of New Zealand’s insinuation that this past week’s interest rate hike may be the last for a while, the NZD has taken a hit.  The fall of the NZD/USD is exactly what the RBNZ wants as a cheaper currency makes exporting products like Milk Powder more profitable for the nation’s businesses.  Perhaps RBNZ Governor Graeme Wheeler was taking a peek at Business Confidence over the last couple months as a catalyst for his decision to indicate a neutral stance in the future as confidence has eroded for four straight months and reached levels not seen in over a year.  Businesses clearly aren’t happy with the high-flying NZD, and the RBNZ is doing something about it. However, that action may have been a little late for this survey which could see its declining streak continue.

23:05 GMT          UK Gfk Consumer Confidence (July)

UK consumer confidence has been rising sharply in the past year; it will be interesting to see if weakness in wage growth starts to weigh on the consumer. If it does then it could be a bumpy start for sterling.

Wednesday, July 30, 2014

9:00 GMT             Eurozone Consumer Confidence (July)

The market expects a solid report for July, with the forecast predicting a reading of 57.2, down a touch from 57.5. An upward surprise could boost the pound as the market looks for more balanced growth in Q3. Conversely, a miss for this index could weigh on the pound as the market starts to worry if Q2’s 0.8% growth rate is sustainable for the rest of this year.  

12:30 GMT          US Advanced Gross Domestic Product (Q2)

The talking heads around the US are still trying to describe the Q1 GDP disappointment as transitory and largely due to weather-related effects, but they likely won’t be able to use the same playbook if Q2 GDP fails to rebound.  This will be the first of three GDP releases and will likely have the most impact and is curiously expected to recover 2.9%, the exact amount it declined in the previous quarter.  Based on the recent contraction, pessimism may dominate sentiment, so if this were to somehow recover even more strongly than consensus, bearish USD traders may be scrambling for the exits.

18:00 GMT          Federal Open Market Committee Interest Rate Decision

Very little fanfare is anticipated for this Fed decision as the minutes from the previous meeting already told us how the Fed plans to end QE: in October with a single $15 billion reduction.  So that question is already answered, plus CPI fell back to 1.9%, just below the Fed’s stated 2.0% goal after last month’s spike above (2.1%).  So what is the Fed going to do?  Probably take a page from the Bank of England and try to be as boring as possible so nobody pays much attention.  The statement will probably be similar to the last statement and will probably keep the boat as steady as possible. 

Thursday, July 31, 2014

1:30 GMT             Australian Building Permits (June)

The Reserve Bank of Australia is likely envying their brethren across the Tasman Sea as the RBNZ has been relatively effective in talking down their currency AFTER raising interest rates for the fourth straight meeting.  The RBA and Governor Glenn Stevens have been trying for months to jawbone the AUD down, but it always seems to stubbornly bounce back.  He might get a little help after the release of Building Permits which sprung back convincingly last month (+9.9%) after 3 straight months of decline.  Recent history is not on the side of another rise as a figure of such exuberance is often followed by a sharp retraction.  Since 2010, each time this metric improves by more than 8.0%, it has been followed the next month by a negative number.  If that pattern continues, watch for the AUD/USD to begin following the NZD/USD lower.

6:00 GMT             UK Nationwide House Prices (July)

After rising to a high of 11.8%, the highest level of house price growth in the UK for ten years, the market is expecting a small moderation to 11.3% YoY. The risks could be to the downside after the BOE sounded a note of caution on the outlook for the housing market and housing sales tend to slow in the summer months.

9:00 GMT             Eurozone Unemployment Rate (June)

The market expects this index to remain steady at 11.6% for the third consecutive month. This could suggest that the recent recovery in Europe’s labour market may be coming to a halt.   

9:00 GMT             Eurozone Consumer Price Index (July)

This is the second reading of CPI and the market expects no change at 0.5% MoM. This is still extremely low and suggests that the ECB should remain vigilant on deflation threats. A weaker inflation reading could weigh heavily on the EUR.    

12:30 GMT          Canadian Gross Domestic Product (May)

Expectations are high at 0.3% for Canadian GDP in May as some consumption figures released before the growth factor have been showing strength.  When seeing results like Building Permits (+13.1%), Housing Starts (198k), Employment Change (25.8k), Manufacturing Sales (+1.6%), Wholesale Sales (+2.2%), and Retail Sales (+0.7%) which all beat their consensus expectations, it’s hard not to assume that GDP will improve upon the previous month’s 0.1% rise.  However, despite the overwhelming positivity of these figures, the Ivey PMI fell back to 48.2 from 54.1 for May which indicated contraction in the economy. 

Friday, August 1, 2014

1:45 GMT             Chinese HSBC Final Manufacturing PMI (July)

The Flash data for this release this past week showed that China is heading back toward positivity with a strong 52.0 reading, improving upon last month’s 50.7 figure.  Considering the close proximity of time between the flash and final figures (only 8 days), there may not be much deviation from one to the next.  Therefore, if it remains above the 51 level, there may not be much fanfare for a move; however, if it falls below, the NZD may see the brunt of the selloff.

9:00 GMT             Eurozone Markit Manufacturing PMI (July)

This is the final reading of PMI manufacturing. We will also get the national numbers on Friday, which are also worth watching out for.  The market expects the overall Eurozone figure to remain at 51.9, which suggests that the recent dip in sentiment could be temporary. We believe that any change to the initial number could trigger a reaction in the EUR.     

8:30 GMT             UK Markit Manufacturing PMI

The market expects a solid report for July, with the forecast predicting a reading of 57.2, down a touch from 57.5. An upward surprise could boost the pound as the market looks for more balanced growth in Q3. Conversely, a miss for this index could weigh on the pound as the market starts to worry if Q2’s 0.8% growth rate is sustainable for the rest of this year.

12:30 GMT          US Non-Farm Payrolls and Unemployment Rate (July)

There is no need to trump up this release as readers are likely already well aware of the implications of NFP.  Traders’ favorite market-moving event has been on a tear lately by posting five straight months of more than 200k jobs gained, a feat that hadn’t been accomplished since 1999.  If it were to score higher than 200k this time around, it would be the first six-month 200k+ stretch since 1997.  Can we officially say that employment is strong in the US yet?  Consensus is calling for around 230k as of this writing, but could change as some leading indicators like ADP, Chicago PMI, and Challenger Job Cuts shape the narrative.

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About the Author
Matt Weller

Senior Technical Analyst for FOREX.com. Matt has actively traded various financial instruments including stocks, options, and forex since 2005. Each day, Matt creates research reports focusing on technical analysis of the forex, equity, and commodity markets. In his research, he utilizes candlestick patterns, classic technical indicators, and Fibonacci analysis to predict market moves. Matt is a Chartered Market Technician (CMT) and a member of the Market Technicians Association. You can reach Matt directly via e-mail (mweller@gaincapital.com) or on twitter (@MWellerFX).

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