BCR Weekly Outlook (11 February 2019)


Posted on: 2019-02-11 (Day) By BCR Weekly Outlook


 

Key Events for this week (11/02 – 15/02)

 

Time (GMT)

Country

Currency

Event

Previous

Forecast

 

Mon 11/02 09:30

GBP

UK GDP

0.6%

0.2%

 

 

 

The UK publishes Gross Domestic Growth (GDP) numbers on a monthly basis, but this report is for December, thus concluding the fourth quarter, thus making it a more significant publication. After enjoying a robust growth rate of 0.6% in Q3, a considerable slowdown is due in Q4: only 0.3%. December is projected to see no growth. If GDP data meet expectations, the focus may shift to manufacturing production, which is set to rebound and rise by 0.2% in December.

Wed 13/02 01:00

NZD

New Zealand Rate Decision

1.75%

1.75%

 

 

 

After the nation reported an increase in unemployment, the RBNZ may shift its tone to a more dovish one. The interest rate is projected to remain unchanged at 1.75% despite the data and the deteriorating global outlook. The fall in the kiwi supports exports amid the downturn. Governor Adrian Orr will meet the press at 2:00 GMT as the RBNZ also publishes its quarterly inflation expectations report.

Wed 13/02 09:30

GBP

UK Inflation Report

2.1%

2.0%

 

 

 

Inflation stood at 2.1% in December, just above the 2% target. The report for January is projected to show a dip to 1.9%, just below the target. Falling energy prices are behind the deceleration in inflation. Core CPI is expected to remain unchanged. While the BOE is Brexit-dependent, inflation data still matters for the day after Brexit.

Wed 13/02 23:50

JPY

Japan GDP

-0.6%

0.4%

 

 

 

Japanese figures do not move the yen very often, but GDP is a different animal. The Japanese economy shrank by 0.6% in the third quarter, but such episodes of contraction are not rare in the Land of the Rising Sun. The nation is not expected to enter a recession, with Q4 GDP projected to increase by 0.4%.

Thu 14/02 07:00

EUR

German GDP

-0.2%

0.1%

 

 

 

According to the central bank’s projections, the largest economy in the euro-zone barely escaped a recession. After contracting in Q3 by 0.2%, mostly due to new emissions regulations, the “locomotive” of the euro-zone is expected to grow by 0.1% in Q4. However, economic data have been disappointing. Stagnation or an outright second consecutive quarter of contraction, and thus a recession, cannot be ruled out.

Thu 14/02 13:30

USD

US Retail Sales

0.2%

0.1%

 

 

 

The US finally publishes the retail sales report for December, delayed due to the government shutdown. Headline sales rose by 0.2% in November, and so did core sales. However, the Control Group jumped by 0.9%. Data for December will likely be more moderate: headline sales are predicted to rise by 0.1%, core sales to remain flat, and the control group is unlikely to repeat the same surge. While consumption is central to the US economy, the data is a tad stale. Nevertheless, it will help shape expectations for the belated GDP report due late in February.

Thu 14/02 13:30

USD

US PPI

-0.2%

0.1%

 

 

 

Contrary to the retail sales, the Producer Price Index report is for January, thus more up to date, albeit less important. Headline PPI dropped by 0.2% in December and is now expected to rise by 0.1%. Core PPI also slipped, by 0.1%, and now carries expectations for an increase of 0.2%.

Thu 14/02 Tentative

GBP

UK Parliament Votes on Brexit

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---

 

 

 

UK PM Theresa May continues trying to convince her European counterparts to amend the Brexit deal and change the legally binding text regarding the Irish Backstop. She is repeatedly refused. A Labour initiative to offer support in return for a closer relationship with the EU, close to the Norwegian model, is also on the cards. If there is a new accord, it will be brought to Parliament. The clock is ticking down towards Brexit Day, March 29th, 2019. An extension is also on the cards.

Fri 15/02 15:00

USD

US Consumer Confidence

91.2

94.5

 

 

 

The University of Michigan’s Consumer Confidence Sentiment dropped to 91.2 points in January after scoring close to 100 points in previous months. It will be interesting to see if sentiment rebounded in the preliminary release for February. The government shutdown and a slight slowdown in the economy had an impact.

Fri 15/02 Late Fri

USD

Government Shutdown Deadline

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---

 

 

 

The US government reopened after the longest shutdown in history, but only until February 15th. Lawmakers will be scrambling to reach an accord to keep it open. President Donald Trump insists on funding for a border wall on the Mexican border while Democrats vehemently oppose it. Republicans are stuck in the middle. Negotiations are set to accelerate during the week and most analysts expect a positive resolution, but anything can happen and change the market mood.

 

 

You May Always Concern U.S. Dollar and XAUUSD (GOLD)

 

U.S. Dollar Index (DXY)

 

Weekly OHLC              95.340             96.469             95.300             96.415

Weekly Gain/Loss       1.13%

Key Resistance            96.500             97.000

Key Support                 95.000             94.500

 

The US Dollar strengthened for five days in a row after an impeccable bouncing on EMA200 in the Daily Chart to give massive pressure to the bears. The US Dollar index settled at 96.417. It is currently moving in the ascending channel and the possibility for US Dollar to get stronger is high. Despite the fact that the report on the US labor market did not cause a powerful wave of dollar purchases, it still spawned a trend to strengthen against most currencies. In the Weekly chart, an impressive marubozu candlestick was formed and it is likely to climb further to the nearest resistance at 96.50. It could be the signs of another upside attempt by the Bulls towards 97.00 – 97.50 and any breakouts at this level will catalyst the Bulls to embolden and giving more pressure to the Bears, it is likely opening the way to 98.00 handle. On the other hand, another attempt to the level of 95.00 – 94.00 will be considered as a trend-changing and it might be moving further down if the 94.00 handle is broken.

 

 

XAUUSD (Gold)

 

Weekly OHLC              1316.97           1317.36           1302.67           1313.62

Weekly Gain/Loss       -0.25%

Key Resistance            1325.00           1350.00

Key Support                 1300.00           1280.00

 

Gold markets initially fell during the week but turned around to show signs of bullish pressure. Looking at the shape of this candlestick, the market suggests that it is ready to go higher. However, there is a lot of resistance between January and May, and the $1350 level above will be the target, and that being the case, it is likely of a grind higher and the $1300 level should be rather supportive. Looking at the daily charts, it shows more clues about the next possible movement. The daily charts featured a hammer on the Thursday session, and then a grind higher on Friday. Because of this, it will eventually make an attempt to break out, and with a softening Federal Reserve it’s very likely to see that happen. However, it if turns around and break below the $1300 level, then the market probably goes to the $1275 level. This is a market that has been very bullish as of late, but that doesn’t mean there isn’t some type of pullback that could be significant coming. A short-term pullback are nice buying opportunities with an eye on the longer-term charts. If the price can finally break above the $1350 level, then the market can go to the $1400 level next.

 

 

More Trading Opportunities

 

EURUSD

 

Weekly OHLC              1.14539           1.14598           1.13129           1.13235

Weekly Gain/Loss       -1.14%

Key Resistance            1.1500             1.1550

Key Support                 1.1300             1.1250

 

The Euro has fallen rather hard during the week, slamming towards the 1.13 level at the end of it. However, that is an area that is massive support, and then an area that has a lot of importance. It is expected to see buyers coming in to pick up the Euro “on the cheap”, as the Federal Reserve has shown itself to be rather dovish, and therefore a bit lacking when it comes to supporting the US dollar itself. That in and of itself provides a little bit of a lift to this market. Unfortunately, there is a scenario in Europe that isn’t conducive to buying pressure, as there are a lot of concerns when it comes to European growth. The economic numbers in Europe are starting to fall again, and more concerning they are starting to fall in Germany of all places. Because of this, the market will continue to show a lot of concern to the upside as well, and therefore the 1.15 level above continues to offer significant resistance. In other words, it might be a bounce, but it may not from a longer-term standpoint.

 

 

GBPUSD

 

Weekly OHLC              1.30753           1.31027           1.28540           1.29358

Weekly Gain/Loss       -1.07%

Key Resistance            1.3000             1.3050

Key Support                 1.2850             1.2800

 

The British pound has fallen during most of the week but turned around on Friday to show signs of life again. That’s a very good sign, considering that it is right at a downward trend line, which of course is exactly where the buyers jump in. At this point, the market is trying to find a reason to rally, and with a softening Federal Reserve, it makes sense that the US dollar would fall. That helps the British pound in general, but the Cable needs good news out of the UK to confirm everything. As soon as some type of positive momentum when it comes to the Brexit deal, the British pound is going to shoot straight up in the air. At this point a lot of “smart money” is starting to dip their toes into the British pound, anticipating a major move. After all, by the time the news comes out on something like this, the impulsive move is already over. In that case, buying in little bits and pieces as long as it can stay above this general region will probably be the best way to start buying, and the 1.27 level underneath is massive support as well. Ultimately, the price is expected to climb higher to the 1.33 level, but it may take some time to get there.

 

 

AUDUSD

 

Weekly OHLC              0.72469           0.72637           0.70598           0.70994

Weekly Gain/Loss       -2.04%

Key Resistance            0.72500                       0.73000

Key Support                 0.70500                       0.70000

 

The Australian dollar fell a bit during the week, crashing into the 0.7050 level, which is an area that has shown rather significant support. Beyond that, the massive support near the 0.70 level that extends down to the 0.68 handle. In other words, the longer-term trader is going to look for is going to be some type of supportive candle stick just below to start getting long again. The daily chart does suggest a short-term bounce, but the longer-term chart suggests that it needs to find buyers in this area. It is still finding a lot of bearish pressure, but the focus would be on that massive hammer which is at an area that has been important on monthly charts. However, this is an area that has been important for so long that it makes a lot of sense that longer-term traders are looking to get involved. Institutions are buying the Australian dollar based upon longer-term need. That hammer that formed about five weeks ago is so bullish and the attention must be focused on it. The 0.7250 level above is massive resistance, so it’s going to take work to get above there. Once it does break that respective level, the market could run to the 0.75 handle.