This week in forex has certainly been an eventful one, with Fed’s Chairwoman Janet Yellen delivering a historic speech on U. S. Federal Reserve interest rates, a significant forex broker as a suspect of fraud and many other things. But first, it’s time for a recap of the week behind us as well as a forecast for the week ahead:
This Week in Forex – Currencies
The EUR/USD pair has seen some important developments over the last week. For one, the trend seems to be turning, and it is safe to assume that the situation on the market can no longer be described as bullish – at least not with any certainty. In fact, unless the Euro recovers and manages to stay higher than 1.1310/15, it seems as though we could be looking at a new range forming for the upcoming week. Should it actually come to form, it would most likely remain between 1.1190 and 1.1370 and once this range passes the threshold in any direction, this will likely start a new trend.
It would seem that the neutral phase of the GBP/USD pair is finally over, and the Pound is going bullish once again. The BoE rate expectations have done it some good after all. It seems that target and stop-loss levels should stay close to 1.3375 and 1.3100 each. This is certainly an interesting development and we will continue to monitor it. The British currency is still far from stable, but it is certainly getting there.
The Australian dollar, on the other hand, continues its range-bound roller-coaster alongside its U.S. counterpart. The downward bias is no longer as pronounced as it used to be, so the old 0.7545/50 range should be modified accordingly to 0.7560/0.7690.
The New Zealand dollar is similarly continuing its range from last week, and there is no reason to change the neutral outlook at this point in time. There might be some consolidation but despite everything the breakout of the 0.7170/0.7350 range would seem unlikely. Should it happen, however, it could certainly mean there is a new trend in the same direction as the breakthrough.
Finally, there is the Japanese Yen. Where the outlook seemed bearish a short while ago, it seems that neutral is the way of the immediate future – at least unless the U.S. dollar manages to drop below 99.90 and remain there, which does not seem likely. However, the current prognosis is a 99.90/101.30 range that may well be broken soon, but make sure to wait for confirmation before getting on the trending bandwagon. Our advice is that to make sure the directional move is sustained.
Forex Forecast for Major Pairs:
EUR/USD: A change from bullish to neutral; the range is 1.1190/1.1370.
GBP/USD: Bullish; Target is 1.3370/75.
AUD/USD: Neutral as before; it will probably remain in the 0.7560/0.7690 range.
NZD/USD: Neutral as well. The prognosis is identical to that from last week (0.7170/0.7350 range).
USD/JPY: A decisive shift from bearish to neutral. The new range is 99.90/101.30.
Yellen Speaks: The Interest Rates May Be Raised Soon?
According to Janet Yellen, Chair of U.S. Federal Reserve, the time to raise the interest rates may be nearing. Apparently, the “solid labor market performance” and “economic activity and inflation” all speak in favor of hiking the interest rates, but not immediately. She pointed out that, while the goals Fed has placed in terms of employment and stable prices are slowly being fulfilled, there is still a long way to go. Still, increasing the interest rates is a distinct possibility in the near future. As for the exact time of this hike, Yellen was not inclined to specify the details.
However, the increase may come as early as next month, according to Laura Rosner of BNP Paribas in New York. There is much accent on raw data, especially the labor market figures. These could serve to indicate when the next increase might arrive. Judging by the overall economic growth, however, the situation on the job market may improve further, albeit at a more reasonable pace. There is also the outcome of the Presidential elections in November to take into account, but the situation is expected to improve regardless.
Yellen stated that the FOMC predicts growth in the GDP, improvement in the labor market department as well as another two percents in the inflation rate in the coming years. This means there will be room for additional increases in the federal funds rate, but inflation and employment must be considered. She might be gearing up for the possibility of yet another recession, considering how strongly she endorsed the measures Fed had previously taken. In conclusion, when the next recession hits, the expectations are that interest rates worldwide will fall a lot easier than before – but in order to do that, they need to get up first.
A Word of Caution: Trade-24
Before moving on to the final segment, it should be pointed out that any traders who have open accounts with the (allegedly Swiss) forex broker called Trade-24 might want to reconsider their actions. According to the FCA, this broker has been labeled as a possible fraud, as they have been servicing clients within the UK without the authorization they were obligated to obtain.
Under UK laws, in order for a company or a firm to provide financial services, they need an official license from either the local regulators or similar agencies within the EU. Apparently, this broker has been trading in forex, commodities, CFDs and stocks without such authorization. Their platform is MetaTrader 4 and according to their language selection, their customer base consists mostly of English, Polish, French, Arabic, Russian, German, Spanish and Bulgarian language speakers.
It is important to mention that the FCA is not the first agency to identify Trade-24 as a possible fraud, as this honor belongs to the IFSC, the regulatory agency of Belize. It seems that TRADE Investments Ltd., despite their previous claims, has no license issued in Belize. On their website, Trade-24 claim they operate from Switzerland, London and Paris and that IFSC regulates them and has provided them with their license, which the latter have recently denied. Dealing with reputable, regulated brokers is the number one recommendation to forex traders worldwide.
Forex Reminder: The Upcoming Week
14:30 USD Personal Income (JUL)
14:30 USD Personal Spending (JUL)
14:30 USD Real Personal Spending (JUL)
01:30 JPY Jobless Rate (JUL)
01:30 JPY Job-To-Applicant Ratio (JUL)
01:30 JPY Household Spending (YoY) (JUL)
01:50 JPY Retail Trade (YoY) (JUL)
01:50 JPY Retail Trade s.a. (MoM) (JUL)
01:50 JPY Large Retailers’ Sales (JUL)
10:30 GBP Net Consumer Credit (JUL)
10:30 GBP Net Lending Sec. on Dwellings (JUL)
10:30 GBP Mortgage Approvals (JUL)
10:30 GBP M4 Money Supply (MoM) (JUL)
10:30 GBP M4 Money Supply (YoY) (JUL)
14:00 EUR German Consumer Price Index (MoM) (AUG P)
14:00 EUR German Consumer Price Index (YoY) (AUG P)
16:00 USD Consumer Confidence (AUG)
01:05 GBP GfK Consumer Confidence Survey (AUG)
09:55 EUR German Unemployment Change (AUG)
09:55 EUR German Unemployment Rate s.a. (AUG)
11:00 EUR Euro-Zone Unemployment Rate (JUL)
11:00 EUR Euro-Zone Consumer Price Index Estimate (YoY) (AUG)
11:00 EUR Euro-Zone Consumer Price Index – Core (YoY) (AUG A)
01:50 JPY Japan Buying Foreign Bonds (Yen) (AUG 26)
01:50 JPY Japan Buying Foreign Stocks (Yen) (AUG 26)
03:00 CNY Manufacturing PMI (AUG)
03:00 CNY Non-manufacturing PMI (AUG)
16:00 USD Construction Spending (MoM) (JUL)
16:00 USD ISM Manufacturing (AUG)
16:00 USD ISM Prices Paid (AUG)
16:00 USD ISM New Orders (AUG)
01:50 JPY Monetary Base (YoY) (AUG)
01:50 JPY Monetary Base End of period (AUG)
07:00 JPY Consumer Confidence Index (AUG)
14:30 USD Change in Non-farm Payrolls (AUG)
14:30 USD Unemployment Rate (AUG)
14:30 USD Average Hourly Earnings (YoY) (AUG)
14:30 USD Average Weekly Hours All Employees (AUG)
14:30 USD Change in Household Employment (AUG)