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Forex Weekly Outlook October 12-16 (based on forexcrunch article)

UK and US inflation data, German economic sentiment, UK and Australian employment data, US Retail sales, Unemployment Claims, Philly Fed Manufacturing Index and Consumer Sentiment. These are the main market movers on forex calendar.

Last week the Federal Open Market Committee released the minutes from its crucial meeting in September, where the members decided to hold off raising the Federal funds rate. The policymakers acknowledged that the labor market has improved over the year, getting closer to their estimates of longer-run normal rates. Regarding inflation, FOMC members stated that subdued inflation will improve in the near term and would return to normal levels over the medium term. Fed Chair Janet Yellen said it was decided to hold off the rate hike in September but expects such a move later this year.

  1. UK Inflation data: Tuesday, 8:30. Inflation in the UK tumbled back to 0% in August due to a smaller rise in clothing prices and cheaper fuel prices. Oil prices declined to a six-and-a-half year low of around $42.50 per barrel. Meanwhile core inflation weakened to 1.0%, leaving no room for a rate hike in the near future. Analysts expect the Bank of England will start to raise interest rates in the first quarter of 2016. Inflation is expected to remain flat this time.
  2. Eurozone German ZEW Economic Sentiment: Tuesday, 9:00. German economic sentiment plunged in September to the lowest level in 10 months amid rising concerns over the growth outlook in emerging market economies, especially China. The index fell for the sixth straight month, to 12.1 in September from 25.0 in August. Economists forecasted a decline to 18.3. Current conditions remained positive, rising to 67.5 from 54.7, in the prior month. Analysts forecast economic sentiment will decline further to 6.8 in October.
  3. UK Employment data: Wednesday, 9:00. The number of people claiming unemployment benefits increased by 1,200 in August. The claimant count rate remained unchanged at 2.3%, its lowest rate since February 1975. Wages continued to rise, with pay excluding bonuses rising by 2.9% and pay including bonuses exceeded estimates rising by 2.9%. These encouraging figures may prompt the Bank of England to raise rates in the first quarter of 2016. The number of new unemployed is expected to decline by 2,300
  4. US Retail sales: Wednesday, 12:30. Retail sales in the U.S. climbed 0.2% in August followed an upwardly revised 0.7% rise in July. Economists forecasted a 0.3% gain. However, despite the stock-market turmoil, consumers continued to spend their savings from cheap energy prices. Furthermore, the constant improvement in the employment market including wage rise have also boosted household spending. Retail sales excluding automobiles gained 0.1% in August after advancing 0.6% the prior month. Analysts expected a 0.2% rise. Retail sales are expected to rise 0.2% while core sales are predicted to decline by 0.1%.
  5. US PPI: Wednesday, 12:30. U.S. producer prices were flat in August, suggesting weak inflation pressures. Economists expected a negative reading of 0.1%. This reading followed a 0.2% gain in July. Lower crude oil prices continued to weigh on producer prices. In the 12 months through August, the PPI declined 0.8% after a similar decline in July. It was the seventh straight 12-month decrease in the index. Producer prices are expected to decline by 0.2% in September.
  6. Australian Employment data: Thursday, 0:30. The Australian economy created 17,400 new jobs in August, exceeding forecasts of a 5,200 gain. The positive jobs gain reduced the number of unemployed by 14,400. Despite the month to month volatility, an addition of 60,000 positons was registered over the last three months, indicating a growth trend in the Australian labor market. Australian job market is expected to add 7,200 positions, while the unemployment rate is expected to remain at 6.2%.
  7. US Inflation data: Thursday, 12:30. U.S. inflation pressures remain low, falling slightly more than expected in August. Consumer price index contracted 0.1% following July’s rise of 0.1%. Analysts expected a flat reading. On an annual basis, headline inflation remained positive, rising 0.2%, as in the prior month. Falling energy prices continues to lead the soft headline inflation data. Meanwhile, CPI excluding energy and food prices rose 0.1%, following July’s rise of 0.1%, in line with market forecast.
  8. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial applications for jobless benefits declined more than expected last week, reaching a near 42-year low 263,000 claims. The 13,000 decline provides a positive sign for the labor market after the lukewarm payrolls figure posted in the prior week. It was also the 31st straight week that claims remained below the 300,000 threshold, indicating a strong labor market. The four-week moving average of claims dropped 3,000 to 267,500. The number of US unemployment claims is expected to reach 269,000 this week.
  9. US Philly Fed Manufacturing Index: Thursday, 14:00. Business activity in the manufacturing sector within the Philadelphia area lost momentum in September, falling into negative territory, reaching minus 6. The reading was far worse than initially expected and came after an 8.3 reading in August. However, despite the gloomy headline figure, the new orders index edged up to 9.4, from the previous reading of 5.8 and the employment index climbed to 10.2, from the August’s reading of 5.3. Economists believe September’s reading was sentiment driven showing a temporary setback. Philly Fed Manufacturing Index is expected to reach minus 1.8 in October.
  10. US Prelim UoM Consumer Sentiment: Friday, 14:00. U.S. consumer sentiment plunged to 85.7 in September following 91.9 in the previous month. This was the lowest reading in a year, suggesting moderate economic growth and mild inflation. Households expected weaker overseas growth would affect the U.S. economy. Current conditions as well as future outlook have also declined. Consumer sentiment is expected to improve in October to 88.8.
 

Week Ahead by Crédit Agricole (based on efxnews article)

"Next week could prove pivotal for the policy divergence trade with important releases out of the US and the UK likely to determine whether the recent aggressive repricing of Fed and BoE rate hikes has been justified. We think that the US activity and inflation data as well as the UK inflation and labour market data will highlight that investors may have overreacted selling USD and GBP of late. At the same time, we think that data out of Japan should strengthen the case for more QE at the end of the month (CACIB’s central case) and weaken JPY."

What we’re watching: 

JPY - "CACIB economists have front-loaded their call for BoJ QE to 30 October from January 2016. We revised our year-end forecast for USD/JPY higher to 125 from 123 previously."

USD - "Better-than-expected data may bring expectations of the Fed considering higher rates this year back on the agenda."

GBP - "Still constructive labour market conditions as reflected in next week’s data should prevent rate expectations from falling further."

AUD - "Disappointing labour data should keep RBA rate expectations strongly capped. We remain in favour of selling AUD rallies."

 

EUR/USD: calm before storm - Barclays (based on efxnews article)

Barclays made a fundamental forecast for EURUSD expecting big volatility for this pair and for USD/JPY as well:

  • "Last week saw a significant improvement in global risk sentiment, benefitting risky assets, despite soft data prints and cautious central bank rhetoric (Figures 1 and 2). However, the market is likely heading into an environment of lower growth, soft inflation and additional policy stimulus."
  • "Central bank rhetoric is starting to reflect this new reality. The September FOMC minutes showed that the decision not to hike was not a close call, though some FOMC participants had described it as such.. At the same time, the ECB highlighted downside risks to euro area growth and inflation while the BoE also erred on the side of caution."
  • "We look for the ECB to announce further easing before year-end and have frontloaded our call for additional BoJ easing at its 30 October meeting."
  • "Strategically, we like being long USD heading into those central bank meetings."
  • "In line with this view, we maintains a short EUR/USD position in its portfolio from 1.1278, with a stop at 1.1562, and a targets at 1.0460."


So, Barclays is still keeping sell position with 1.0460 take profit and stop loss as 1.1562. And as we see from the chart above - the price is on bearish market condition for the secondary ranging within 1.0461 key support level and 1.1713 key resistance level, so 1.0460 may be the real bearish target at year-end for example.

 

EURUSD Intra-Day Fundamentals - ZEW Economic Sentiment (based on efxnews article)

Credit Agricole made a fundamental forecast concerning ZEW news event - German ZEW Economic Sentiment and ZEW Economic Sentiment. It's a leading indicator of economic health - investors and analysts are highly informed by virtue of their job, and changes in their sentiment can be an early signal of future economic activity:

  • "Investors will focus on the German the ZEW index for October. ZEW should point at some worsening in business sentiment on account of China, VW and, more recently, Deutsche Bank. We expect the former to be a longer-term drag on business sentiment in the Eurozone’s growth engine."
  • "Indeed, recent trade and industrial orders data has already signalled that the German exporters are struggling in the face of the global demand shock emanating from China."
  • "A disappointing ZEW today could add to the worries in the market. All that said, however, with the ECB still not actively considering more easing measures, there need not be an immediate impact on EUR."


From the technical point of view - EURUSD price is on bullish market condition in intra-day basis for the ranging within 1.1396 key resistance level and 1.1343 key support level. The 'reversal' level for this pair is 1.1270 so if the price breaks this support level from above to below - the reversal from the primary bullish to the primary bearish market condition may be started.
 

EURUSD Intra-Day Fundamentals - USD Into Retail Sales (based on efxnews article)

BNP Paribas made fundamental forecast concerning Retail Sales news event for today:

  • "They expect only a flat reading in total retail sales although the control group sales should come in at a more respectable pace of 0.3% m/m. They also expect softer producer prices ahead of what should be similarly soft headline CPI numbers on Thursday."
  • "That said, the September payrolls report and dovish Fed communications have already lead to an even further pullback in US rates, with the amount of priced in Fed tightening now in line with the most dovish FOMC policymakers."
  • "This, as well as lighter positioning, should make the USD less vulnerable to bad news."


From the technical points of view - the price is located to be above 200 period SMA and above 100 period SMA for the bullish breakout: the price broke key resistance levels in intra-day basis and stopped near 1.1469 level. If the price will break this 1.1469 resistance level from below to above so the bullish breakout will be continuing, otherwise - ranging bullish.

 

Outlooks For EUR/USD: Sell Signal - SEB (based on efxnews article)

Skandinaviska Enskilda Banken made a technical forecast for EUR/USD pair related to intra-day and day basis:

  • "The buyers continued to be in control pushing prices up close to the 1.15 handle. With 1.1476 achieved also the ideal target point for a three wave upside correction (from the early Sept low point), a-b-c, has been fulfilled. So if the past month and a half is a corrective climb, well then it should end right here and now."
  • "We are keeping a close eye on 1.1461 as its break kicks off an hourly sell signal and confirming an hourly RSI bear divergence."



Thus, SEB is estimating two key levels for this pair: 1.14 in intra-day base and 1.15 on long term situation. Anyway, the bearish AB=CD pattern was formed on W1 timeframe together with the bearish retracement pattern so we can expect more bearish situation with this pair in the few coming weeks for example.



 
Sergey Golubev:

Outlooks For EUR/USD: Sell Signal - SEB (based on efxnews article)

Skandinaviska Enskilda Banken made a technical forecast for EUR/USD pair related to intra-day and day basis:

  • "The buyers continued to be in control pushing prices up close to the 1.15 handle. With 1.1476 achieved also the ideal target point for a three wave upside correction (from the early Sept low point), a-b-c, has been fulfilled. So if the past month and a half is a corrective climb, well then it should end right here and now."
  • "We are keeping a close eye on 1.1461 as its break kicks off an hourly sell signal and confirming an hourly RSI bear divergence."



Thus, SEB is estimating two key levels for this pair: 1.14 in intra-day base and 1.15 on long term situation. Anyway, the bearish AB=CD pattern was formed on W1 timeframe together with the bearish retracement pattern so we can expect more bearish situation with this pair in the few coming weeks for example.



this is what I expected too short term.keep up the good analysis
 

3 reasons to sell EUR/USD - BNP Paribas (based on efxnews article)

BNP Paribas suggested to make a short with EUR/USD with 1.0900 target and 1.1630 stop loss, and it is based on 3 fundamental reasons:

  • "Further risk-on – Eurozone capital outflows resume and markets start to reprice Fed hikes = EURUSD lower."
  • "Stable risk – Without a strong impulse from risk sentiment, the eurozone’s trade surplus is probably still putting some natural upward pressure on EURUSD. But with valuations already expensive, EUR funding should be more attractive = no clear signal for EURUSD."
  • "Return of risk-off – EURUSD continues to rally, which forces the ECB to step up dovish rhetoric and ultimately ease policy = EURUSD first higher, then lower."


"We entered a short EUR/USD position with a target at 1.0900, and a stop at 1.1630."
 

Weekly Outlook: 2015, October 18 - 25 (based on forexcrunch article)

The US dollar showed weakness against most currencies as the data proved weak. Is this a change of direction? Mark Carney’s and Janet Yellen’s speeches, US Building Permits, and rate decisions in Canada and the Eurozone stand out. These are the major events on forex calendar. Here is an outlook of the top events for this week.

Last week U.S. Retail sales and Philly Fed Manufacturing Index missed expectations reducing chances for a Fed rate hike this year. Retail sales report inched up 0.1% while expected a 0.2% gain. Philadelphia Manufacturing Index contracted for the second month in October. The better inflation numbers allowed the dollar to recover, especially against the euro, which was hit by its own central bank. Commodity currencies were mixed, each to its own, with the Aussie being the weaker link.

  1. Mark Carney speaks: Tuesday, 10:00. BOE Governor Mark Carney will speak in London. Consumer prices have dropped 0.1% in September, putting further pressure on Bank of England governor Mark Carney to push prices up in order to reach the inflation target of 2.0%. Furthermore, additional downside risks such as Global weaknesses and domestic economy still exist. Market volatility is expected.
  2. US Building Permits: Tuesday, 12:30. The number of building permits edged up 3.5% in August to a seasonally adjusted annual rate of 1.17 million, following 1.13 million in July. Economists expected a smaller rise to an annual rate of 1.15 million. On a yearly base, the number of permits were up 12.5% compared to August 2014 indicating a positive trend in the housing sector, despite the slower release of housing starts. The number of permits are expected to reach 1.16 million tis time.
  3. Janet Yellen speaks: Tuesday, 15:00. Federal Reserve Chair Janet Yellen will speak in Washington DC. Yellen stated at the FOMC press conference that despite postponing the rate hike in September, she still sees a rate rise in 2015. However, the climate among policymakers has changed. Two FOMC members voiced their objection for a rate hike in 2015 and Yellen may have to face multiple dissents from the dovish wing of the FOMC. Market volatility is expected.
  4. Canadian rate decision: Wednesday, 14:00. The Bank of Canada maintained its interest rate at 0.5% on its September meeting, noting the previous two rate cuts in January and July were still boosting economic growth. However, global market uncertainty, especially in China, continues to trouble policymakers and exporters alike. Economists reduced their expectations of a rate cut in October to a 19% from a 32% chance beforehand.
  5. Eurozone rate decision: Thursday, 11:45. The European Central Bank kept its interest rates at record lows in September. The European Central Bank downgraded its inflation forecast to 1.1% next year, leaving the door open for an expansion of its bond-buying program. Draghi said the quantitative easing program, could run “beyond” its original deadline of September 2016. However, the Governing Council is not too concerned with the low inflation levels, claiming it is the temporary effect of the slump in oil prices.
  6. US Unemployment Claims: Thursday, 12:30. The number of new claims for U.S. state unemployment benefits dropped by 7,000 to 255,000 last week, the lowest level in 42 years. The better than expected release followed a 263,000 reading in the week before. The four-week moving average also hit the lowest rate since 1973 and continuing claims for the previous week fell to their lowest in 15 years, indicating the US labor market remains resilient. The number of jobless claims is expected to reach 266,000 this week.
 

EUR: outlook for the coming week by Morgan Stanley (based on efxnews article)

EUR: Bullish
"We believe that EURUSD could head higher before we see pushback from the ECB. Indeed, we don’t expect anything from next week’s meeting. Our base case is for no further easing, but in the tail risk that the central bank does decide to do more, this would be likely to come in December alongside the ECB’s new forecasts. With further action from the ECB unlikely in the near term, and US rates falling, EUR is becoming less attractive as a short term funder, offering it support."


From the technical point of view - the price is on primary bearish market condition for the ranging between the following key support/resistance levels:

  • 1.1956 resistance level, and
  • 1.0607 support level.

The price may start the bear market rally by the breaking 1.1459 and 1.1713 resistance levels from below to above, and we may see the local uptrend in this case only for example.

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