The week behind us has not been too eventful, although it did have some moments. The most important developments concern things that have just happened or that are expected to happen in the next few days. There are fierce debates within Fed about raising the rate, with mounting pressure from banking sector, whose funds may deplete significantly in mid October. In Europe, plans are being made concerning the future of the European Union, and therefore the Euro by proxy.
The Week Behind Us:
EUR/USD: The Euro’s neutral phase may well change soon due to several important events, mostly related to French and German economy, but that should not happen at least by next Thursday. Meanwhile, the Euro should trade within the 1.1150/1.1330 range.
GBP/USD: Recently, we have seen a slight rebound of the pound, but it is far from enough to change its bearish outlook. The target for stop-loss should be set at 1.3340 and the immediate target should be in the vicinity of 1.3060.
AUD/USD: The Australian dollar is not looking well as of late, so we could expect a further drop, at least to 0.7420.
NZD/USD: Thursday saw a twist in the fate of the New Zealand currency, and support and resistance levels are estimated at 0.7200 and 0.7305 respectively.
USD/JPY: This week did not see too many developments, and we have yet to see a decisive move before we can declare an upward trend. The US currency has yet to close above the 103.30, its resistance level, before it continues to soar – so far, it managed to reach 103.34 at one point, but was unable to stay there. The range is still there, but it needs to be tweaked a bit: 101.20/103.30.
Forex Forecast for Major Pairs:
EUR/USD: Neutral, the range should be 1.1150/1.1330.
GBP/USD: Bearish, with a new target at 1.3060.
AUD/USD: Bearish – with a drop that is expected to go as low as 0.7420.
NZD/USD: Bearish – but probably limited to 0.7200.
USD/JPY: Neutral; the new range is 101.20/103.30.
The Fed Conundrum
Probably the biggest news this week hasn’t even happened yet, but everybody is talking about the upcoming Fed debate on whether or not to raise the interest rate.
Neither their EU or UK counterparts have made any decisive changes in their monetary policies in recent past, even though it should be said they have certain leanings towards easing action, much like the BOJ has already done. However, the Fed is leaning in the opposite direction, which begs the question: do they know something the Europeans and the Japanese do not?
So far, the general consensus among the economists – if you can call it that – has predicted that out of four announced interest rate hikes this year, only the December one has a snowball’s chance of actually realizing.
A Snowball’s Chance
The strong payroll numbers cited by some Fed executives do not seem to hold much sway over the rest, especially since the more recent economic indicators are sending a mixed message. For instance, the ISM has seen a drop in new orders, and both industry and service sectors have recently shown some bad numbers in relation to their activity. If we add retail sales into the mix, the odds seem truly stacked against the interest rate hike at this point. Unless they support the claims that the economic activity is much stronger than previously believed or that inflation is running amok – which it is not – it will be hard to justify another hike at this time.
If they plan to reach an agreement, people over at Fed will have only a few opportunities before December; one is this month, and there is a meeting just before the presidential election. It seems things would have gone much easier if this was happening in Japan. There, the BOJ has been implementing an extremely easy policy, whose results are expected to be announced next week.
A Post-Brexit European Journey
On Friday, leaders of EU nations have assembled to discuss and outline a plan for the future, now that Britain has decided it was time to say “goodbye.” Between this, the refugees and the ailing economy, they had a lot to discuss.
Many of the member states have not been doing too great over the past few years – not in the economy sphere with Greece, Spain, Portugal and recently Italy have all shown signs of, shall we say, ‘fatigue’. And states such as Belgium or France have certainly not done well with a string of Islamic terrorist attacks, which have pretty much obliterated the public support that was already eroded by a record influx of migrants.
All over Europe, anti-EU parties are gaining in support, and their values are anything but liberal and migrant-friendly. To make matters worse, until the UK finally leaves, any such summit could not be held in a formal capacity since they are still technically part of the EU. To say the EU as an organization AND as an idea are in dire peril would be an understatement at this point.
The Bratislava Road Map
The EU is in dire need of reform, both in the economical and the political sense, and this summit has been described as a last ditch effort to save it before it is too late. So far, they seemed focused on the things they see eye to eye on, such as defense cooperation, creating more jobs and securing the external EU borders.
However, nothing can be truly negotiated before France, Germany and the Netherlands elect new governments, and that will not happen before the second half of 2017, so this is more of a general outline rather than a full agreement in its own right.
Forex Reminder: The Upcoming Week
NZD Westpac NZ Consumer Confidence (3Q)
00:30 NZD Performance Services Index (AUG)
01:01 GBP Rightmove House Prices (MoM) (SEP)
01:01 GBP Rightmove House Prices (YoY) (SEP)
16:00 USD NAHB Housing Market Index
NZD Dairy Auction Avg. Winning Price MT (SEP 20)
NZD Dairy Auction Whole Milk Powder MT (SEP 20)
03:30 AUD RBA Sept. Meeting Minutes
08:00 CHF Trade Balance (Swiss franc) (AUG)
14:30 USD Housing Starts (AUG)
14:30 USD Housing Starts (MoM) (AUG)
14:30 USD Building Permits (AUG)
14:30 USD Building Permits (MoM) (AUG)
JPY BOJ Annual Rise in Monetary Base (SEP 21)
JPY BOJ Basic Balance Rate (SEP 21)
JPY BOJ Macro Add-On Balance Rate (SEP 21)
JPY BOJ Monetary Policy Statement
JPY BOJ Policy Rate (SEP 21)
00:45 NZD Net Migration SA (AUG)
01:50 JPY Merchandise Trade Balance Total (Yen) (AUG)
01:50 JPY Adjusted Merchandise Trade Balance (Yen) (AUG)
01:50 JPY Merchandise Trade Exports (YoY) (AUG)
01:50 JPY Merchandise Trade Imports (YoY) (AUG)
02:30 AUD Westpac Leading Index (MoM) (AUG)
05:00 NZD Credit Card Spending (MoM) (AUG)
05:00 NZD Credit Card Spending (YoY) (AUG)
08:00 JPY Machine Tool Orders (YoY) (AUG F)
08:30 JPY BOJ governor press conference
10:30 GBP Public Finances (PSNCR) (Pounds) (AUG)
10:30 GBP Central Government NCR (AUG)
10:30 GBP Public Sector Net Borrowing (Pounds) (AUG)
10:30 GBP PSNB ex Banking Groups (AUG)
13:00 USD MBA Mortgage Applications (SEP 16)
16:30 USD DOE U.S. Crude Oil Inventories (SEP 16)
16:30 USD DOE Cushing OK Crude Inventory (SEP 16)
16:30 USD DOE U.S. Gasoline Inventories (SEP 16)
16:30 USD DOE U.S. Distillate Inventory (SEP 16)
20:00 USD FOMC Rate Decision (Upper Bound) (SEP 21)
20:00 USD FOMC Rate Decision (Lower Bound) (SEP 21)
20:00 USD Fed Summary of Economic Projections
23:00 NZD Reserve Bank of New Zealand Rate Decision (SEP 22)
14:30 USD Initial Jobless Claims (SEP 17)
14:30 USD Continuing Claims (SEP 10)
15:00 USD House Price Index (MoM) (JUL)
15:00 USD Existing Home Sales (MoM) (AUG)
16:00 EUR Euro-Zone Consumer Confidence (SEP A)
16:00 USD Leading Indicators (AUG)
02:30 JPY Nikkei Japan PMI Mfg (SEP P)
06:30 JPY All Industry Activity Index (MoM) (JUL)
08:45 EUR French Gross Domestic Product (QoQ) (2Q F)
08:45 EUR French Gross Domestic Product (YoY) (2Q F)
09:30 EUR Markit/BME Germany Manufacturing PMI (SEP P)
09:30 EUR Markit Germany Services PMI (SEP P)
09:30 EUR Markit/BME Germany Composite PMI (SEP P)
10:00 EUR Markit Eurozone Manufacturing PMI (SEP P)
10:00 EUR Markit Eurozone Services PMI (SEP P)
10:00 EUR Markit Eurozone Composite PMI (SEP P)
14:30 CAD Retail Sales (MoM) (JUL)
14:30 CAD Retail Sales Less Autos (MoM) (JUL)
14:30 CAD Consumer Price Index (MoM) (AUG)
14:30 CAD Consumer Price Index (YoY) (AUG)
14:30 CAD Consumer Price Index (AUG)
14:30 CAD Bank Canada Consumer Price Index Core (MoM) (AUG)
14:30 CAD Bank Canada Consumer Price Index Core (YoY) (AUG)
14:30 CAD CPI s.a. (MoM) (AUG)
14:30 CAD CPI Core s.a. (MoM) (AUG)
15:45 USD Markit US Manufacturing PMI (SEP P)
18:00 USD Fed’s Harker, Mester, Lockhart on Panel at Philly Fed Conf
19:00 USD Baker Hughes U.S. Rig Count (SEP 23)