BCR Weekly Outlook 12.17 - 12.23


Posted on: 2018-12-17 (Day) By BCR Weekly Outlook


 

Key Events for this week (17/12 – 23/12)

Time (GMT)

Country

Currency

Event

Previous

Forecast

 

Tue 18/12 13:30

USD

US housing figures

1.263M

1.265M

 

 

 

Building Permits stood at 1.26 million annualized in October and are projected to advance to 1.27 million in November. Housing Starts stood at 1.23 million and are projected to remain at the same level. They will have a meaningful impact if they both go in the same direction. The sometimes cancel offset each other with one number beating expectations and the other missing them.

Wed 19/12 09:30

GBP

UK CPI

2.4%

2.3%

 

 

 

Inflation stabilized in recent months, standing at 2.4% y/y in October. The Bank of England would like to raise rates in order to curb inflation, especially as wages are on the rise as well. However, the increased uncertainty about Brexit holds them back. And now, inflation is projected to tick down to 2.3%. Core CPI is also expected to dropÑ from 1.9% to 1.8%.

Wed 19/12 19:00

USD

Fed Interest Rate Decision

2.25%

--

 

 

 

The Federal Reserve has the last word of the year and it is a critical one. There is no doubt that Chair Jerome Powell and his companions at the FOMC will raise rates. The economy continues enjoying robust growth, employment and wages are rising. In addition, the Fed indicated they are on course to increase interest rates. However, there are signs of a slowdown, mostly felt in the housing sector and in investment. Several Fed officials expressed concern about domestic and global growth. Markets have downgraded expectations for 2019 and have doubts if we will see any rate increase. The Fed’s most recent dot-plot points to three rate hikes. The fresh dot-plot will likely see a downgrade of rate hikes, but two increases are more likely than three, at least in the Fed’s forecasts. A downgrade to one would send the greenback plunging while maintaining three would be perceived as a hawkish sign. Apart from the dots, any changes in the statement will be eyed. In November’s FOMC statement, the Fed downgraded the wording on investment. Will they express worries about additional areas of the economy? Last but not least, Powell will hold a press conference after the event and may provide clarifications. He tends to provide straightforward answers about the economy and about monetary policy, but not about politically sensitive topics such as trade. The impact of the Fed decision will likely reverberate through markets through the week.

Wed 19/12 21:45

NZD

New Zealand GDP

1.0%

0.6%

 

 

 

The small South Pacific nation publishes GDP data only once per quarter. Back in Q2, the economy leaped by 1%, a robust quarterly rate. We will now receive the data for Q3 and a more moderate growth rate is likelyÑ 0.6% is on the cards.

Thu 20/12 00:30

AUD

Australian Jobs Report

32.8k

20k

 

 

 

The Land down under enjoyed an excellent labor market report in October: 32.8K jobs were gained and the unemployment rate fell to 5%. Robust employment does not go hand in hand with other economic figures such as a slowdown in growth and a struggling housing market. A more modest increase of 0.6% is expected and the jobless rate is expected to remain unchanged.

Thu 20/12 Tentative

JPY

BOJ Interest Rate Decision

0.0%

--

 

 

 

The Bank of Japan is the most dovish central bank in the world and this is not about to change. Inflation remains very low and there is no reason to move. The interest rate is projected to remain at -0.10%, a negative rate, and the BOJ are projected to continue targeting the 10-year bond yield. Governor Haruhiko Kuroda will hold a press conference after the decision.

Thu 20/12 12:00

GBP

BOE Interest Rate Decision

0.75%

--

 

 

 

The Bank of England is stuck between a rock-solid economy and a hard Brexit. Wages beat expectations and imply higher inflation, which is not too low. A weaker pound also pushes inflation higher. On the other hand, Brexit uncertainty is reaching new highs. In case the UK crashes out of the EU without a deal, the economic damage could be monumental. Governor Mark Carney and his colleagues will likely keep interest rates unchanged and the same goes for the size of QE, at 435 billion pounds. The vote was unanimous back in November and no dissents are forecast now. Any surprising vote or comment in the accompanying MPC Meeting Minutes may rock the pound. Otherwise, it’s all about Brexit.

Fri  21/12 13:30

USD

US GDP

3.5%

3.5%

 

 

 

According to the second release for Q3, the economy grew by a robust 3.5%. However, a bulk of this growth was related to inventories, which may be depleted in Q4. The third and final release will likely confirm the data. Apart from the headline and inventories, consumer spending and exports are of interest.

Fri  21/12 13:30

USD

US Durable Goods Orders

-4.4%

1.2%

 

 

 

Released alongside the GDP, this more up-to-date figure for November will likely have a significant impact on markets. Headline sales fell by a whopping 4.3% in October according to the final read. They will likely bounce back with +1.8% on the cards. More importantly, core orders rose by 0.2% and the Fed would like to see a more significant advance there. +0.3% is predicted. The data feeds into Q4 GDP.

Fri  21/12 13:30

USD

US Core PCE

1.5%

--

 

 

 

The Fed’s preferred measure of inflation dropped to 1.8% y/y in October and will likely tick up to 1.9% in November after the parallel Core CPI moved up from 2.1% to 2.2%. Month over month, a rise of 0.2% is expected after 0.1% beforehand. The number will likely have a more muted impact than usual as the Fed will have already made its decision earlier in the week.

 

 

 

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

 

U.S. Dollar Index (DXY)

 

Weekly OHLC              96.56               97.70               96.31               97.44

Weekly Gain/Loss       0.91%

Key Resistance            97.700             98.050

Key Support                 96.00               95.44

 

As predicted, the US Dollar Index has formed another impressive Bullish candle in the Weekly Chart and it is parallel with the philosophy of Triangle pattern formation in the H4 chart. The impeccable bounce was seen from the lower trend-line and the Bulls emboldened supported by the fresh buyers from the respective area. The Retail Sales and Industrial Production Reports had surged the US Index to a fresh 2018 high above 97.70 but the escalation was perishable with the disappointing Markit PMI readings taking rates back down to the mid-97.00s. Next week’s Federal Meeting will be the key event for the next movement of the US Dollar, if Powell and Company vote unanimously by projecting another two-interest rate increases on 2019, the US Dollar Index could jolt out above 98.00. On the other hand, a cautious statement would take the US Dollar Index dive to 96.00 by Christmas. From the technical point of view, it is expected the US Dollar Index will surge out upon the breakout through the upper trend-line of the Triangle Pattern. It may re-test the upper trendline before the bulls get an antidote to be violent towards 98.00 handle. While any dovish statement by Powell and Company will revoke this broken trend-line philosophy and it may act as a fake breakout and the US Dollar Index might move lower to the said level at 96.00.

 

 

XAUUSD (Gold)

 

Weekly OHLC              1248.8             1250.1             1232.8             1238.0

Weekly Gain/Loss       0.86%

Key Resistance            1250.00           1265.0

Key Support                 1235.0             1200.0

 

Gold price was sliding to the south after hitting $1250 level as resistance yet again after initially starting the week above it but the slumped movement of Gold might be due to re-testing the Key Resistance becomes Support (RBS) at $1235 level as the rejection was discern visually in the Daily Chart. Gold climbed above the key resistance at 1243.1 and making a new high at 1249.81. In the weekly chart, it remains below EMA200 but the possibility to look for more rooms above is high. The chart pattern indicates there are more rooms upside with $30 to $50 potential towards $1300 and beyond that figure, $1400 will be an area that has been the top of the larger consolidation. The market looks choppy and the reason behind it is due to the Gold is getting a bid goes beyond the US Dollar since the Global fear remains intact. The other possibility is breaking down below the $1200 level, then it will freeze the market to go down to the $1000 level given enough time, but it is not a favor to see the Gold dives since the base has been built quite resiliently so far.

 

 

More Trading Opportunities

 

EURUSD

 

Weekly OHLC              1.1399             1.1442             1.1269             1.1298

Weekly Gain/Loss       -0.88%

Key Resistance            1.1400             1.1500

Key Support                 1.1200             1.1100

 

The Euro slumped during the week and it closed much lower than its Weekly open price. The EURUSD is currently trading inside a major retracement zone at below 1.15 and above 1.12 handles. Last week, the EUR/USD settled at 1.1299. The main trend is down according to the Daily Chart as it remains below EMA200 and a trade through 1.1215 will negate the closing price reversal bottom and signal a resumption of the downtrend while a trade through 1.15 handle will change the trend to up. This pair is probably going to continue to go back and forth in a very tight range between now and the end of the year, as liquidity will start to dry up and there is strong support at the 1.12 handle and any breakouts of this level will send the market much lower to 1.11 & 1.10 handle. The formation of a gigantic Head & Shoulder in the weekly chart may indicates that the Euro might be dumped soon but if its Neckline remains unbroken, the Euro would have a little air to breathe. Beyond that though, there are a lot of buyers underneath so one would have to think that perhaps we could see a significant bounce from this area, so the longer-term trader is probably better served waiting until after New Year’s Day and seeing how the market reacts to the 1.11 area.

 

 

GBPUSD

 

Weekly OHLC              1.2719             1.2759             1.2476             1.2580

Weekly Gain/Loss       -1.09%

Key Resistance            1.2700             1.2800

Key Support                 1.2500             1.2200

 

The British pound continues to drift lower sliding through the 1.27 level as there was a “no confidence vote” for Teresa May. There are a lot of fears of a hard Brexit going forward and the fact that Teresa May went to the EU and they basically explained to her they are willing to renegotiate is bad news for the British pound. However, if the British to sign some type of Brexit agreement, currently being debated between the British Parliament and Teresa May, then we could see a rally in the Pound to the North, but it seems vague at this moment. The Cable is currently settling at 1.2580 after breaking through the major support at 1.27 handle. Any breakthrough to this level will lead the market sinking to 1.22 handle. Rallies at this point are still selling opportunities based upon the downtrend line of the triangle as it remains below EMA200 as well.

 

 

 

AUDUSD

 

Weekly OHLC              0.7179             0.7246             0.7151             0.7172

Weekly Gain/Loss       -0.098%

Key Resistance            0.7200             0.7250

Key Support                 0.7120             0.7000

 

The Australian dollar looks sick and sinking during most of the week and it broke the psychological support at 0.72 handle. The formation of Ascending Broadening Wedge in the Daily Chart indicates that the Aussie may be racked, and it might dive further to the South to find its next support at 0.7120. As the Ascending Broadening Wedge’s lower trend-line has been broken and the price reacts as expected at the respective area before breaking through 0.72 handle to settle at 0.7172 at this moment. There are a lot of negativities in mthe arket and it probably ggrindsits way down to 0.70 level if it manages to break the next support at 0.7120. On Friday morning, China released horrible economic figures, it tortured the Aussie as the Australian dollar is highly levered to the Chinese economy and the trade war going on and although there have been a few minor signs of conciliatory tone, we are still a long way away from solving that issue, which of course the Aussie is very sensitive to. On the other hand, the theory of Ascending Broadening Wedge will be revoked if the price manages to climb above 0.72 handle and there will be a chance to surge higher towards 0.7350 level.