Mohammed Abdulwadud Soubra / Perfil

Weekly Trading Forecast: Yen Intervention, ECB Desperation and Fed Timing

While pressure builds on the technical front, the fundamental threat list continues to grow. Unusual monetary policy currents will compete with risk appetite in the week ahead.

US Dollar Forecast – Dollar Seeks Guidance from Fed Speculation, Risk Trends, ECB and Oil

There can be disadvantages to being the world’s most liquid currency. The Dollar’s intrinsic integration into the global financial system makes it particularly vulnerable when its fundamental health is shaken and the world is in a state of flux.

British Pound Forecast – Little Relief Ahead for G10 FX’s Weakest Currency, the British Pound

We’re less than 70 days away from the historic ‘Brexit’ vote on June 23, and preference remains that a status quo ‘Remain’ vote will win out.

Japanese Yen Forecast - Awaiting the Bank of Japan’s Next Move

Matters just haven’t been the same for the Japanese Yen since the BoJ’s surprise move to negative rates at their January meeting.

Chinese Yuan (CNH) Forecast – Yuan at Risk on Further PBOC RRR Cuts

This week the onshore Yuan (CNH) extended losses against the US Dollar from the last week, while the onshore Yuan (CNY) closed at a slightly higher value.

Gold Forecast – Gold Swings Down to Set Higher Low – Key Support 1211

Gold prices pulled back to mark the first weekly loss in three with the precious metal off 0.79% to trade at 1230 ahead of the New York close on Friday.

While pressure builds on the technical front, the fundamental threat list continues to grow. Unusual monetary policy currents will compete with risk appetite in the week ahead.

US Dollar Forecast – Dollar Seeks Guidance from Fed Speculation, Risk Trends, ECB and Oil

There can be disadvantages to being the world’s most liquid currency. The Dollar’s intrinsic integration into the global financial system makes it particularly vulnerable when its fundamental health is shaken and the world is in a state of flux.

British Pound Forecast – Little Relief Ahead for G10 FX’s Weakest Currency, the British Pound

We’re less than 70 days away from the historic ‘Brexit’ vote on June 23, and preference remains that a status quo ‘Remain’ vote will win out.

Japanese Yen Forecast - Awaiting the Bank of Japan’s Next Move

Matters just haven’t been the same for the Japanese Yen since the BoJ’s surprise move to negative rates at their January meeting.

Chinese Yuan (CNH) Forecast – Yuan at Risk on Further PBOC RRR Cuts

This week the onshore Yuan (CNH) extended losses against the US Dollar from the last week, while the onshore Yuan (CNY) closed at a slightly higher value.

Gold Forecast – Gold Swings Down to Set Higher Low – Key Support 1211

Gold prices pulled back to mark the first weekly loss in three with the precious metal off 0.79% to trade at 1230 ahead of the New York close on Friday.

Latest News

The USD finished the day slightly higher yesterday, despite inflation data disappointing mostly because of falling import prices. Elsewhere, the Bank of England maintained monetary policy as widely expected, spurring some minor volatility in GBPUSD as MPC members expressed their concerns regarding a possible Brexit in the minutes which accompanied the announcement. The Aussie spiked 0.5% in early trading thus far, following the release of mostly positive Chinese economic data - which included better than expected industrial production and fixed asset investment figures, with the all-important GDP number coming in-line at 6.7%.

Today will see the US publishing manufacturing data in the form of empire state manufacturing index, capacity utilization rate and industrial production figures. Additionally, we will see the latest consumer sentiment report from the University of Michigan. Meanwhile, Canada will release manufacturing sales, expected to have contracted by 1.4% month-on-month. This weekend’s meeting between OPEC and non-OPEC oil producers in Qatar regarding a possible production freeze should bring additional volatility to oil’s opening on Monday morning, and subsequently the Canadian Dollar. The current sentiment is low, with rumours tilted towards a vague agreement or promise of further discussion, though oil has rallied 18% since the 5th of April on hopes for a compromise being made.

EUR/USD Intraday: under pressure.

Pivot: 1.1295

Most Likely Scenario: short positions below 1.1295 with targets @ 1.1230 & 1.1185 in extension.

Alternative scenario: above 1.1295 look for further upside with 1.1345 & 1.1370 as targets.

Comment: the RSI lacks upward momentum

The GBPJPY bulls displayed resilience during trading on Thursday following the Bank of England’s dovish stance on future UK rate hikes which left the Sterling heavily pressured across the board. Regardless of this resilience, with mounting Brexit concerns eroding investor attraction towards the pound, bearish investors may be encouraged to send the GBPJPY lower in the near term. From a technical standpoint, the GBPJPY remains bearish and the volatile combination of Sterling weakness and Yen appreciation could send the pair towards 151.00. A decisive breakdown and daily close below 154.00 may encourage a further decline towards 151.00.

Sterling has been on a slightly better footing over the past week, with EURGBP moving down from the high just above the 0.81 level and cable bouncing from the 1.40 level. But the gains are hardly anything to write home about, especially against the background of the broader dollar weakness against EM currencies and also the Aussie over the same period. Today’s MPC meeting is unlikely to upset the tone, but nevertheless in the wake of the better than expected inflation data this week will be watched for any indications on the outlook for policy ahead. There continues to be a fairly strong split between market pricing and the ‘consensus’ form analysts survey, the latter looking for the first move in rates far earlier than the market. Interest rate differentials have nudged in the favour of sterling over the past week and this suggests further near-term gains are possible for sterling. That said, the potential for further losses in the run-up to the EU referendum remains strong.

Overnight, we’ve seen the Monetary Authority of Singapore effectively eased policy overnight by moving to a more neutral stance on the currency from the previous policy of “modest and gradual” appreciation. Being such a small but open economy, the exchange rate is the main policy tool and this change in stance reflects the weakening expectations surrounding their own economy which is itself a reflection of the more uncertain global environment. We’ve seen other Asian currencies weaken in the wake of the decision by the MAS, based on the fears that this could lead to a round of competitive currency devaluations in the region (e.g. Malaysia). Expect mentions of “currency wars” to increase in the press. Elsewhere for today, we see CPI data released in the US, where the headline rate is seen rising to 1.1%. The dollar is likely to remain cautious.

Latest News

Retail sales data out of the US which was released yesterday was a major disappointment, with the headline figure falling by 0.3% versus expectations of a 0.1% gain, in addition to producer prices contracting. The USD initially fell slightly, before posting a strong rally which was only amplified by the release of the Fed’s beige book in which it showed strong wage growth across most states along with economic activity continuing to expand – EURUSD and GBPUSD both dropped 1% and 0.4% on the day, while USDJPY rallied 0.7% aided by the overall risk-on sentiment. This morning sees GBPUSD down nearly 0.6% at the time of writing on no fundamental news, as traders position themselves ahead of the Bank of England interest rate announcement. Lastly, the Aussie initially rallied on stronger than expected employment data, though gave up most gains after the employment report revealed that most job gains were part-time.

Today’s focus will turn to the Bank of England announcement, where it is expected that MPC members will not change monetary policy nor their bank rate votes. Perhaps more interesting will be the central bank’s assessment on current economic conditions given the upcoming Brexit vote. Shortly after, the US will publish inflation and unemployment claims. Although core inflation started to creep up, the headline figure remains stubbornly low, though risks are to the upside given the strong recovery in oil which may translate into higher gas prices. Lastly, a slew of tier-one economic data will be published from China during the overnight session, including GDP, industrial production and fixed asset investments.

Latest News

Rumours regarding a possible oil production freeze between Saudi Arabia and Russia, though quickly refuted by Russian authorities, was enough to push WTI crude oil up 4.5% yesterday - and to the highest level of 2016. As a consequence, USDCAD reached a new 2016 low, dropping below 1.28 temporarily, and fell to a fresh 9-month low. This morning sees commodity-linked currencies such as the Loonie and the Aussie retreating, as gold and oil prices have reversed course. Today’s Chinese trade balance showed optimism with exports rising at the fast pace in a year, which in turn lifted Asian stock markets along with USDJPY –currently trading above 109 for the first time in five days.

Today’s economic calendar picks up steam, with the US due to report retail sales and PPI figures. Both reports are forecasted to show a slight recovery from their previous month, though retail sales continue to remain sluggish. Shortly after the US data, we will see the Bank of Canada announcing its latest interest rate policy, with all analysts expecting no change. The release of crude oil inventory data will also affect the CAD today, following yesterday’s large API build. Later in the evening we will see the FED publishing its beige book, along with an update from Atlanta’s Q1 GDPNow tracker, which currently forecasts a measly 0.1% growth for the first quarter. During the overnight Asian session, Australia will publish employment figures with the unemployment rate expected to have ticked up to 5.9% from previous 5.8%.