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Forex Weekly Outlook July 13-17 (based on forexcrunch article)

EU Economic Summit, Inflation data in the UK and the US German Economic Sentiment, US Retail sales, Employment data from the UK and the US, Rate decision in Japan, the UK and Canada and Janet Yellen’s testimony are the main market movers on Forex calendar. Here is an outlook on the highlights of this week.

Last week the Federal Reserve released the minutes from its June meeting, showing policymakers were concerned about Greece’s debt crisis, saying failure to reach an agreement may result in disruptions in financial markets in the euro area and possibly ricochet into the US economy. The rate hike timeline was also discussed, as mixed economic data made it harder for the Fed to initiate such a move in June. Many members were determined to receive further solid data before deciding to raise rates.

  1. EU Economic Summit: Sunday. Euro zone finance ministers will gather in Brussels for an emergency meeting to discuss Greece’s final proposal. Market volatility is expected.
  2. Eurogroup meetings: Monday.  Finance Ministers from euro area member states, will discuss issues concerning the Eurozon’s economic health and will focus on the Greek negotiations.
  3. UK inflation data: Monday, 8:30. Britain’s inflation rebounded in May, after turning negative in the prior month. Official figures showed prices increased 0.1% amid higher airfare and oil prices. The reading was in line with market forecast. Analysts expect inflation will remain weak in the coming months and will stay below the BOE’s goal of 2% until 2017. However, low prices and rising wages are beneficiary to household finances. UK’s inflation is expected to rise by 0.1% in June.
  4. Eurozone German ZEW Economic Sentiment: Monday, 9:00. German Economic Sentiment Index fell to 31.5 in June, following 41.9 posted in May. Analysts expected a higher reading of 37.5. The Current condition declined to 62.9 from 65.7 reported a month earlier.  External factors as the Greek crisis were the main source of worry for German responders. Germany wishes to keep Greece on the euro zone to maintain the single currency, but there are other voices calling for a Grexit. Economics expect  sentiment will deteriorate to 30.6.
  5. US Retail Sales: Tuesday, 12:30. Americans increased their spending at retailers in May, buying more autos, clothes and building materials. Retail sales rose a seasonally adjusted 1.2% after a mere 0.2% advance in April, indicating the job market continues to improve increasing store sales. The reading was broadly in line with market forecast. Over the past 12 months, sales have gained 2.7%. Excluding automobiles, core retail rose a solid 1% in May while economists forecasted a 0.7% rise. If this trend continues, the Federal Reserve may raise rates in the near future. Retail sales is expected to rise 0.4%, while Core sales are forecasted to advance 0.7%.
  6. Japan rate decision: Wednesday. The Bank of Japan kept its monetary policy in tact in its June meeting. The central bank will continue to expand the monetary base at an annual pace of 80 trillion yen and increase the frequency of its economic outlook reports to improve transparency. The recent slowdown in exports poses risks to economic growth, but Kuroda said that inflation remains on track with accordance to the BOJ’s target. The central bank chief reiterated that Japanese economy is recovering moderately.
  7. UK employment data: Wednesday, 8:30. The number of Britons claiming unemployment benefits declined by 6,500 in May after contracting 7,800 in the previous month. Economists forecasted a bigger decline of minus 12,500. The unemployment rate remained at a seven-year low of 5.5% and wages increased at the fastest rate in four years. The number of unemployed fell 43,000 in the three months to April indicating UK’s labor market continues to improve. The number of unemployed in the UK is expected to decline by 9,300 in June.
  8. US PPI: Wednesday, 12:30. U.S. Producer Price Index edged up 0.5% in May, compared to minus 0.4% in April. Analysts expected a 0.4% rise. On an annual basis, headline inflation fell 1.1%. May’s rise resulted from a broad-based increase in energy prices. Analysts expect that higher pipeline inflation pressures could induce the Federal Reserve to hike rates in September. Producer Prices are expected to rise 0.2% this time.
  9. Canadian rate decision: Wednesday, 14:00. The Bank of Canada maintained its interest rate at 0.75%. The central Bank noted that inflation was in line with projections and consumer spending remains strong, but monetary policy will be re-examined in the coming months.  Bank of Canada governor Stephen Poloz ascribes Canadian expansion to US economic growth, saying a strengthening American economy will provide a major boost for Canada.
  10. Janet Yellen testifies: Wednesday, 14:00. Federal Reserve Chair Janet Yellen will testify before the House Financial Services Committee, in Washington DC, on the Semiannual Monetary Policy Report. Yellen may speak about the reasons for the Fed’s decision to postpone the rate raise in June, and suggest a possible timeline for the first hike. The U.S. economy expanded a solid 2.4% in 2014, but the Fed’s latest prediction for 2015 shows weaker growth of 1.8% to 2%.
  11. Eurozone rate decision: Thursday, 11:45. The ECB maintained its monetary policy unchanged in its June meeting. Mario Draghi noted the monetary stimulus is filtering through to the economy as forecasted and the European Central Bank needs continue the bond-buying plan through to the finish. The ECB forecasts a pickup in growth and inflation in the next three years. The stimulus is also expected to boost domestic demand and raise economic activity. The outlook remained broadly unchanged.
  12. US Unemployment Claims: Thursday, 12:30. The number of initial claims for unemployment benefits in the U.S. edged up 15,000 last week, reaching an adjusted 297,000. The reading was much higher than the 274,000 claims forecasted by analysts. The four-week moving average increased by 4,500 claims to 275,000. Continuing claims, rose by 69,000 claims to a seasonally adjusted 2.33 million. The unexpected rise can be attributed to layoffs in the auto industry. The number of claims is expected to reach 282,000 this week.
  13. US Philly Fed Manufacturing Index: Thursday, 14:00. Manufacturing conditions in the Philadelphia region have improved in June, rising from 6.7 in May to 15.2 in June. Analysts expected a modest rise to 8.1 points. The increase was across the board. New orders climbed to 15.2 in June from 4.0 in May. Paid sub index surged to 17.2 from minus 14.2 in May. However, the employment index fell to 3.8 from 6.7. The reading suggests higher growth in the second half of 2015. Manufacturing activity is expected to decline to12.1 this time.
  14. US Building Permits: Friday, 12:30. U.S. building permits for home construction surged 11.8% in May to a seasonally adjusted annual pace of 1.28 million units. The nearly eight-year high reading suggests a positive trend in the housing sector as well as improvement in the broader economy. Policymakers viewed the housing sector as one of the weak spots in the US economy. More solid data came from retail sales and employment indicating the first-quarter’s soft patch is over. U.S. building permits  is expected to reachv1.11 million in June.
  15. US inflation data: Friday, 12:30. U.S. consumer prices increased 0.4% in May, registering the largest increase in more than two years, amid rising gasoline prices. The rise marks the end of the oil crisis and the sluggish first quarter. The fed estimates inflation will rise over the summer enabling a rate hike in September. Meanwhile, core CPI excluding food and energy costs, inched 0.1%, the smallest gain in five months, after a 0.3% rise in April. On a yearly base, core CPI rose 1.7%, slowing from a yearly increase of 1.8% in April. CPI is expected to gain 0.3%, while core CPI is predicted to grow by 0.2%.
  16. US Prelim UoM Consumer Sentiment: Friday, 14:00. Consumer confidence jumped to 94.6 in May from 90.7 in April. Economists expected the index to advance to 91.2 in June. The rise in confidence was due to solid data released from the job market and consumer spending surged after wages grew and inflation remained low. Consumer confidence is expected to reach 96.7 in June.
 

Canadian Imperial Bank of Commerce: 'Fed Chair Yellen Speaks about the economic outlook at The City Club of Cleveland' (based on efxnews article):


  1. "A lot of what Yellen had to say could be filed away under the title “nothing new”, but there was one statement that stood out."
  2. "One other new feature was a commentary on productivity, and therefore, on potential growth. She expressed concern over the weakness in productivity implied by the mix of solid jobs gains but a more mediocre track for GDP, suggesting she sees that mix as not entirely temporary. If potential growth is slower, that will imply that the GDP pace needed to get to full employment, and thereby require some rate hikes, is also lower."
  3. "Further out, however, we’ve argued that slower trend growth is associated with a lower real neutral rate, as we tend to get less of a push for capacity-expanding capital spending at any given interest rate."
  4. "Overall, the remarks will remind markets that they are pricing in a lower path for rate hikes than Yellen might be thinking at least for 2015, although there’s still a lot of uncertainty in her own mind on that score."
 

Crédit Agricole about Week Ahead: Greece, Yellen, ECB, BoC, Buy USD, Sell GBP (based on efxnews article)

  • 'EUR: ECB and Greece. Depending on the outcome from the Eurogroup meeting and the EU summit over the weekend, markets will either brace for a Grexit or buy back risk. When it comes to the EUR we are still of the view that rallies should be sold.'
  • 'USD: Humphrey Hawkins testimony eyed. The testimony will give Fed Chair Yellen the opportunity to prepare the markets for a potential rate hike in September.'
  • 'GBP: Stay short. Given limited room for rising rate expectations we favour selling GBP rallies. We see little scope of next week’s inflation data making a case for rising rate expectations.'
  • 'CAD: BoC on hold but dovish. Next week’s main focus wil be on the BoC rate announcement. We expect them to keep the policy rate unchanged but to strike a dovish tone.'
 

Fundamental Weekly Forecasts for US Dollar, USDJPY, GBPUSD, AUDUSD and GOLD (based on dailyfx article)

 

EUR/USD: Make Or Break; Levels & Targets - Citi (based on efxnews article)


"The failure to set a new high on 18 June (1.1439 versus 1.1468 high on 15 May) raised the first question mark. Now, a close below 1.0819, if seen, would create a lower low and firmly suggest that the downtrend has resumed," Citi adds.

In that eventuality, Citi thinks that the present pattern could then be identified as either:

"1- A head and shoulders formation with a neckline at 1.1124 and a downside target of at least 1.0370 (new trend lows).

2- An effective double top with a neckline at 1.0819 and a minimum target of 1.0185-1.0200," Citi clarifies.

"While longer term (possibly summer 2016) we retain a target of .8800-.9000 we would envisage seeing the target rangers above in the weeks ahead if this break of 1.0819 takes place," Citi projects.

 
Weekend Edition with John O'Donnell (based on fxstreet article)

Merlin and John break down the weeks biggest topics including the huge selloff in the Chinese exchanges, the ongoing Greek debt restructuring saga, the issues with the New York Stock Exchange and much more!


 

Goldman Sachs for EUR/USD: 1.04 at year-end? EUR/USD will fall 'a lot further' (based on efxnews article)

  1. "We see our results as consistent with our view that low inflation in the Euro zone is partly structural, which supports our view that ECB QE will last at least through September next year, which in turn supports our EUR/$ downside view."
  2. "GS sees EUR/USD trading at 1.02, 1.00, and 0.95 in 3, 6, and 12-month respectively."
 

Tech Setups For AUD/USD, NZD/USD, USD/CAD - Barclays (based on efxnews article)

AUD/USD: 'We are bearish and would use any upticks as opportunity to sell against resistance in the 0.7600 area. Our downside targets are towards support near 0.7335 and then the 0.7100 area.'


NZD/USD: 'Resistance in the 0.6820 area (21-dma) is expected to provide selling interest and helps keep us bearish in the short term. A move below 0.6620 would confirm downside towards our targets near the 0.6560 multi-month range lows.'

USD/CAD: 'No change. A move above resistance near 1.2780 would confirm upside towards the 1.2835 year-to-date highs. A break above 1.2835 would signal higher towards our greater targets near 1.3065.'


 

Trading News Events: U.K. Consumer Price Index (based on dailyfx article)

A further slowdown in the U.K. Consumer Price Index (CPI) may generate a near-term pullback in GBP/USD as it puts increased pressure on the Bank of England (BoE) to retain its current policy throughout 2015.

What’s Expected:


Why Is This Event Important:

However, the stickiness in the core rate of inflation may limit the downside risk for the sterling as BoE Governor Mark Carney anticipates faster price growth in the second-half of the year, and the central bank head may continue to prepare U.K. households and businesses for higher borrowing-costs should the fundamental developments show signs of a stronger recovery.

Nevertheless, improved confidence along with resilience in household consumption may prompt a strong inflation print, and a positive development may pave the way for a near-term advance in GBP/USD as the BoE remains on course to normalize monetary policy.

How To Trade This Event Risk

Bearish GBP Trade: U.K. Headline & Core CPI Highlight Slower Price Growth

  • Need red, five-minute candle following the release to consider a short British Pound trade.
  • If market reaction favors bearish sterling trade, short GBP/USD with two separate position.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit, set reasonable limit.
Bullish GBP Trade: U.K. Inflation Exceeds Market Expectations
  • Need green, five-minute candle to favor a long GBP/USD trade.
  • Implement same setup as the bearish British Pound trade, just in reverse.
Potential Price Targets For The Release
GBPUSD Daily



  • Waiting for a break of the downward trend from June to instill a more bullish outlook for GBP/USD as the RSI fails to retain the bearish momentum.
  • Interim Resistance: 1.5630 (38.2% retracement) to 1.5650 (38.2% expansion).
  • Interim Support: 1.5330 (78.6% retracement) to 1.5350 (50% retracement).
Impact that the U.K. Core CPI report has had on GBP during the last release
Period Data Released Estimate Actual Pips Change
(1 Hour post event )		 Pips Change
(End of Day post event)
MAY 2015 06/16/2015 08:30 GMT 1.0% 0.9% -14 +62
May 2015 U.K. Core Consumer Price Index

GBPUSD M5: 68 pips price movement by GBP - CPI news event:


 

Royal Bank of Scotland - 'EUR/USD goes lower multi-month but in a choppy range over the next few weeks' (based on efxnews article)

RBS is thinking that EURUSD will be in more ranging condition for the next few weeks:

  • "The last minute agreement with Greece ought, in theory, play EUR/USD negative by allowing negative front-end rate spreads to be a bigger FX driver again. Also EUR negative, we believe, is the renewed fall in oil. For two to three months, markets have romanced the Euro area ‘reflation’ trade."
  • "Conclusion: EUR/USD goes lower multi-month but in a choppy range over the next few weeks," RBS concludes.

If we look at Ichimoku chart D1 timeframe so we can see the following:

  • the price is located inside Ichimoku cloud for ranging market condition;
  • Sinkou Span A line (which is the border between primary bullish and the primary bearish on the chart) is located near and above the price and it means the primary bearish market condition;
  • AbsoluteStrength indicator in separate window is rising by bearish value (tomato colored line) and rising by bullish value (skyblue colored line) on the same time which means for ranging market condition to be continuing during the next few weeks.
  • nearest support level is located in bearish arear of the chart: 1.0915 ;
  • nearest resistance level is located in bullish area of the chart: 1.1215.


Thus, I can confirm: we will see the choppy/ranging market condition within the primary bearish during the next few weeks.
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