Euro takes turn for the worse

Market movers: Forex Weekly Technical Outlook


Global Data Highlights

Monday, August 25th:

1445 BST/ 0945 ET: US Markit PMI data (August)

Although this survey is not as widely followed as the ISM surveys, it is worth watching as it is the first of the countrywide surveys. In recent months, the composite PMI reading has surged to its highest ever level (the survey was started in 2011).  In July the composite survey backed away from 61.0, although it remained a healthy 60.6. It is worth watching to see if this month’s survey can stay above 60.0. If it can, it could help to boost the USD and may suggest that the bounce back in GDP in Q2 has lasted into the third quarter.

1500 BST/ 1000 ET: US New Home Sales (July)

New home sales plunged in June, dropping more than 8%; however, at 406k sales for June, this was above the long-term average of 368k. The summer months can be quiet in the real estate business, so it could take a little while longer to make up for June’s decline.

Tuesday, August 26th:

0930 BST/ 0430 ET: UK BBA Mortgage Loans (July)

The market expects loans to pick up to 44,000 from 43,265 in June. Reports that more first-time buyers are coming back to the market could boost mortgages, added to the recent declines in house prices, could also boost demand in the usually quiet summer months.

1330 BST/ 0830 ET: US Durable goods orders (July)

The market is expecting a very large headline reading of 7.5%, up from 1.7% in June; however this gain is likely to be from large transportation orders, which are notoriously volatile. Excluding transportation, the market expects a more subdued reading of 0.4%. After the bounce in the dollar last week, watch out for any data misses, as disappointments could weigh heavily on the buck.

Wednesday, August 27th:

No high-impact data releases scheduled

Thursday, August 28th:

1000 BST/ 0500 ET: Eurozone Confidence Indicators (August)

After weaker-than-expected PMI surveys for August, the risk is to the downside for these confidence indicators. The market is looking for a decline in economic and industrial confidence; however, it expects consumer confidence to remain steady. We think the bias could be for even larger negative readings as geopolitical risks hit sentiment. However, the decline in the EUR in recent weeks could limit the downside, if these surveys surprise on the upside then we could see a mini rebound in the EUR.

1100 BST/ 0600 ET: UK CBI Reported Sales (August)

This survey measures business sentiment in the retail sector. It has hovered in a fairly tight range in recent months and after bouncing back in July the market expects another gain in August to 25, which could bring this survey to its highest level since April. We don’t expect too much movement in the pound on the back of this survey as this is a light data week for the UK; instead the pound may move in line with overall market momentum.

1330 BST/ 0830 ET: Second reading of US Q2 GDP

The market is expecting a slight downward revision to the GDP data to 3.9% from 4%. This is still a solid reading and would suggest that the US economy made a substantial recovery after the dismal Q1 figures. If the figures are revised higher then we could see upward pressure on the dollar, although it could weigh on US stock markets, since it may bring forward expectations of a rate hike from the Fed.  


Friday, August 29th:

0005 BST/ 1905 (28th Aug) ET: UK GfK Consumer Confidence (August)

It looks like consumer confidence may have peaked in June: the market expects another decline for August, but the risk could be to the downside after a spate of geopolitical concerns in recent weeks.

0030 BST/ 1930 ET (28th), Japanese CPI (July)

This is the usual month-end data rush for Japan. CPI is the first release, and the market is expecting national headline CPI to fall to 3.4% from 3.6% on an annualised basis. The core rate is expected to stay at 2.3%. We wouldn’t read too much into this decline as it may reflect a strong rise in CPI in July 2013. We expect inflation to remain within the BOJ’s preferred ranges. But, if we get a deeper drop in CPI, it could raise some eyebrows and may weigh on the yen.

0030 BST/ 1930 ET (28th) Japanese Jobless rate (July)

The market expects no change in the jobless rate; however, it could fall below 3.7% after the unexpected spike in June. The rate could fall back to 3.5%, the lowest level since May. The job-to-applicant ratio is expected to remain at 1.10, so we think the unemployment rate is likely to remain at a healthy level for some time.

0050 BST/ 1950 ET ( 28th) Japanese Retail trade (July)

This could be the most important release from an economic perspective. Spending has already recovered after the April tax rise, even though prices have been on the increase during the same period. The market expects another healthy 0.3% monthly gain, while the annual rate is expected to improve to -0.1% from -0.6% in June. Any larger increase could push the annual rate into positive territory for the first time since April. If this happens then it could limit the downside in the yen.

0050 BST/ 1950 ET (28th), Japanese Industrial production (July)

Industrial data could be the biggest focus for the markets on Friday after a large 3.4% decline in June. The market is expecting a 1.3% gain in July, however, there is a risk that the recovery could be even more modest, which would leave output levels well below levels reached earlier this year.

1000 BST/ 0500 ET: Eurozone Unemployment Rate, (July)

The market expects no change at 11.5%. The labour market is improving in the currency bloc, but at a snail’s pace. Going forward, if the German economy fails to recover from Q2’s dip and this leads to job losses then the unemployment rate could reverse its recent course and head north once again.

1000 BST/ 0500 ET: Eurzone CPI estimate (August)

This is, by far, the most important data release for the EUR this week. The market expects the currency bloc to take another step towards deflation, with CPI expected to fall to 0.3% from 0.4%. This could add fuel to the belief that the ECB will have to embark on a QE programme before too long. It may even happen at the September meeting since we get the latest release of ECB staff economic forecasts. If these forecasts show further declines in inflation, then the ECB may have no choice but to take action next month. European bond yields have declined further in recent days and the EUR also fell below 1.33 last week, the prospect of QE could trigger further EUR declines.

1330 BST/ 0830 ET: US PCE data (July)

The core PCE data is a key inflation reading that is watched closely by the Fed, thus the market should watch this data closely. The market expects no change at 1.5%, which is below the Fed’s preferred rate of inflation at 2%. The PCE deflator is also expected to remain at 1.6%. If we get a weaker reading than expected, we could see the dollar struggle to make further advances, as it may ease pressure on the Fed to consider rate hikes in the medium-term.

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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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