This upcoming week is light on fundamental releases compared to the past couple of them.
Thursday, we get Retail sales and Jobless Claims data.
Retail Sales m/m (May)
Core Retail Sales m/m (May)
Jobless Claims (most recent week)
Friday, we get Producer Price Inflation and Consumer Sentiment data.
PPI m/m (May)
Prelim UoM Consumer Sentiment (June)
The ECB cut the refi rate from 0% to -0.10% and the benchmark rate from 0.25% to 0.15%. The bank also will stop sterilization of the SMP and Draghi left the door open for more stimulus measures such as Quantitative Easing. These policy decisions are meant to increase liquidity and encourage bank lending.
This week is light on news for the Eurozone. Let’s take a look at the EUR/USD.
EUR/USD fell after the ECB announcement press conference, but immediately rebounded above the 1.35 handle. It looks bullish in the near-term, but we should monitor the current rally attempt as a correction. A break above 1.38 would be needed to revive the bullish continuation outlook. For now, with a dovish ECB, and an almost 500-pip decline in the past month, traders might continue to be bearish on EUR/USD this week, especially if price pushes higher.
In the 4H chart, you can see strong resistance starting around 1.3735. Around 1.3750, there’s the 50% retracement, and just above 1.38, we have the 61.8% retracement. If price makes it to the 1.3750-1.38 area and pauses, while the 4H RSI also turns lower from overbought levels (above 70), then traders could be ready to continue the developing downtrend.
The BoE didn’t shake things up as much as the ECB, as it maintained the status of its asset purchase program and the key interest rates. There were some positive notes on the economy, and the market still has the next interest rate hike pegged in the first half of 2015. This week is light on fundamentals.
Manufacturing Production m/m (April)
The manufacturing PMI data from last week already showed strong growth in May. Tuesday’s manufacturing data for April, can help confirm this, but its impact on the pound should be limited.
Claimant Count Change (May)
Unemployment Rate (April)
Better-than-expected jobs data can help the GBP. The drop in unemployment rate as expected should keep GBP strong against EUR, but it does not give it any edge against the USD, because the FOMC is in a similar situation in terms of interest rate hike expectation.
BoE Gov. Mark Carney will speak at the annual Mansion House Dinner in London. This is not likely the platform for any policy bombshells, but Carney may reiterate why the BoE maintained rates in June. His tone on growth expectation can provide some additional clues to whether the BoE will be raising rates sooner or later in 2015.
At Key Resistance:
The 4H Chart shows a rally off a double bottom. The rally is challenging a falling trendline. A break above 1.6850 is likely to clear this falling trendline, and revive a bullish continuation outlook, to at least 1.69, then 1.70.
A break below 1.6780 support/resistance pivot however will put the focus back toward the 1.67 low from last week. A break below 1.67 continues a choppy downtrend, and the 1.66 handle could be the next target and support.
For the Japanese Yen, the only real market mover is the BoJ. Economic data tend to have very limited impact on price movements. This week, the Bank of Japan will meet and make a monetary policy statement on Thursday followed by a press conference on Friday.
Results of BoJ’s aggressive stimulus measures are showing. The BoJ is expected to maintain the pace to boost the monetary base 60-70 trillion yen per year.
The key level a couple of week’s ago was the 2014-low at 100.75. The market held above 100.80 and pushed above 102. This week, the key level will be 103. Ability to hold north of 103 after the week is over could be a strong bullish continuation signal, first to the 104.12 resistance, then the 105.44 2014-high.
A break below 102.00 however could spell trouble for this bullish outlook, and refocus price action toward the 2014-low and 100.80 support.
The Reserve Bank of New Zealand (RBNZ) is expected to raise rates for the 3rd time in a row on Wednesday, from 3.00% to 3.25%. There will be a subsequent press conference as well.
The NZD/USD has declined from 0.8779 to 0.8402 following an initially bullish reaction to April’s rate hike from 2.75% to 3.00%.
Last week, the pair broke above a falling trendline, and looks to be in a bullish reversal attempt in the 4H chart. Watch the market get into consolidation and maybe even a slight bullish bias ahead of the RBNZ statement.
After the RBNZ, let’s see which side of 0.86 NZD/USD ends up on. If it stays south of 0.86, May’s bearish momentum could carry through in the short-term, with the focus back toward at least 0.84. Above 0.86, the outlook could be turning bullish again, and the 0.8779 2014-high could be in sight.
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