BCR Weekly Outlook (14 January 2019)


Posted on: 2019-01-14 (Day) By BCR Weekly Outlook


 

Key Events for this week (14/01 – 20/01)

Time (GMT)

Country

Currency

Event

Previous

Forecast

 

Tue 15/01 Tentative

GBP

UK Parliament votes on Brexit

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The UK government delayed the vote that was scheduled for December due to prospects of a defeat. PM Theresa May toured Europe in an attempt to secure concessions about the Irish backstop issue, but her counterparts were only willing to provide clarifications but no changes to the legal text. She was hoping that the ticking clock towards Brexit Day on March 29th would push MP’s to support the agreement. At the moment, it seems like the government is set to lose. Parliament secured the right to curb the government’s powers in case of a no-deal Brexit, in a humiliating defeat for the government. What will May do if the deal is rejected? One option is to push for a no-deal Brexit which would send the pound plunging. Another is to hold a second referendum. The public has slightly shifted to the Remain camp but anything can happen, and uncertainty will prevail. A snap election is also an option and markets would fear a Labour government led by Jeremy Corbyn. Postponing Brexit is also on the cards, even if it is currently denied by the government. It could push the pound higher. All in all, only one thing is clear: uncertainty will trigger high volatility.

Tue 15/01 13:30

USD

US PPI

2.5%

2.5%

 

 

 

Producer prices impact consumer prices down the line. Headline PPI rose by 0.1% in November as energy prices cooled. Core PPI surprised with a significant increase of 0.3%. The headline is projected to drop by 0.1 while Core PPI to advance by 0.2%.

Tue 15/01 15:00

EUR

Mario Draghi talks

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The President of the European Central Bank presents the annual report before the European Parliament in Strasbourg and will have the opportunity to share his views about the economy. Recent signs have been worrying, with growing chances of a recession in Germany and in Italy. On the other hand, unemployment is down and inflation is steady. He may also express his opinions on the global economy.

Wed 16/01 09:30

GBP

UK CPI

2.3%

2.2%

 

 

 

The European Central Bank concluded 2018 by ending the QE program, as expected. ECB President Mario Draghi was slightly cautious in his comments about the economy, expressing concern about protectionism but maintaining the expectations for a rate hike in 2019. The minutes will provide further detail.

Wed 16/01 13:30

USD

US Retail Sales

0.2%

0.2%

 

 

 

The US economy is centered on consumption. The volume of sales in November was more modest than in previous months but satisfactory. Sales increased by 0.2% and upwards revisions were recorded as well. Core sales rose by 0.2% as well - may be postponed due to the government shutdown

Fri 18/01 14:04

USD

FOMC’s John Williams talks

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Williams is the New York Fed President and considered No. 3 at the central bank. He has been quite optimistic about the economy in recent speeches but has not had his chance to voice new opinions in quite a while. In his speech in New Jersey, it will be interesting to hear if Williams goes dovish.

Fri 18/01 15:00

USD

US Consumer Sentiment

98.3

97

 

 

 

The University of Michigan’s consumer survey hit 98.3 points in December according to the final version, off the highs but reflecting optimism. We will now receive the preliminary data for January which is expected to fall to 96.1 points.

 

 

 

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

 

U.S. Dollar Index (DXY)

 

Weekly OHLC              95.675             96.680             94.624             95.270

Weekly Gain/Loss       -0.42%

Key Resistance            96.000             97.000

Key Support                 95.000             94.000

 

The US Dollar slumped in the second week of 2019, but it managed to recover slightly after impeccable bouncing from EMA200 in the Daily Chart.  The US Dollar is weaker against most of major pairs, but it has reverted the daily losses and navigating the upper end of the range, it settled at 95.270. US Dollar index is likely hunting for 96.00 in the following week. The Fed’s probable re-pricing of the tightening pace in the next months continues to gather traction among investors as well as the performance of the US fundamentals. There are speculations that the economy could enter a technical recession at some point in 2020. Sustaining the grim near-term outlook on the buck, the Fed’s stance now signals more patience and flexibility, while extra progress in the US-China trade talks should also exert further downside pressure in the currency. In the Daily chart, the bouncing from EMA200 could be the signs of another upside attempt by the Bulls towards 96.00 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 97.00 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              1284.12           1296.83           1279.23           1287.52

Weekly Gain/Loss       0.26%

Key Resistance            1300.00           1350.00

Key Support                 1265.99           1243.46

 

Gold prices are trading sideways and consolidating, waiting for the dollar to make its next move.  Commentary from Fed Chair Powell on Thursday shows that the Fed is likely on hold for the time being. Gold price failed to make a further move above $1300 handle in two weeks. The $1300 handle is a psychological level and at this point, the pullback is expected, and any drops will be the opportunity to Long and it might be pulled back to $1265.99 and 1243.46, the level $1250 underneath will be supportive due to up trending channel that has been broken out of. Shorting will not be a good trade at this moment due to arising the sentiment of purchasing this precious metal. Gold price hits its high at $1296.83 and any breakthrough this level will likely open the way to $1377.99. The other possible scenario, any break down below the $1243.46 level, there will be a chance for the price to drop back down to the $1200 level.


 

 

 

More Trading Opportunities

 

EURUSD

 

Weekly OHLC              1.14093           1.15689           1.14036           1.14640

Weekly Gain/Loss       0.48%

Key Resistance            1.1500             1.1600

Key Support                 1.1400             1.1300

 

The Euro has broken the 1.15 handle and it is showing signs of significant strength. The market breaking above the 1.15 level is a good indicator that 1.18 is around the corner but the movement shall be showing a sign of continuous bullish pressure in order to open more upside rooms The greenback is probably being punished for the Federal Reserve waffling on its automatic plans to raise interest rates. EURUSD is bouncing from EMA200 in the daily chart and it could bring many possibilities about the next movement since the Bears continuously giving pressure to the Bulls and the price settled at 1.1464, underneath 1.15 handle. It might be a fake breakthrough above 1.15 handle but beyond that, ECB us set to stop buying assets and in that case, the price is likely to grind higher to 1.18 and perhaps 1.25 but that is quite a way down the road, and probably needs the Federal Reserve to explicitly suggests that the rates are not raising any more. The other possible scenario, any movement towards 1.14 handle underneath will resume the previous choppy movements for this pair.

 

 

GBPUSD

 

Weekly OHLC              1.27311           1.28654           1.27065           1.28387

Weekly Gain/Loss       0.85%

Key Resistance            1.2900             1.2950

Key Support                 1.2700             1.2500

 

The Cable had a slightly positive week against the greenback and the bulls managed to settle at 1.28387, gained 0.85% from the previous week. Unfortunately, there are a lot of fears of a hard Brexit going forward and the Cable will continue to see a lot of negativity because of Brexit and of course the lack of clarity when it comes to that situation especially the UK Parliament Vote on Brexit will take place on Tuesday. The Cable is likely to re-test EMA200 in the daily chart, however, the movement is uncertain until the voting’s day. If it manages to break below 1.27 level, then 1.25 handle will be next target as it has shown itself to be very supportive, and of course it is a large, round, psychologically significant figure, but there are a lot of uncertainties when it comes to the United Kingdom and its economy, not the least of which would be to Brexit. The EMA200 in the top of the descending triangle will continue to put bearish pressure on this market and it could very well be an excellent shorting opportunity for a bit of a longer-term move.

 

 

 

AUDUSD

 

Weekly OHLC              0.71228           0.72344           0.71139           0.72107

Weekly Gain/Loss       1.23%

Key Resistance            0.72500           0.73000

Key Support                 0.71500           0.71000

 

The Australian dollar has formed an impressive bullish candle in the weekly chart but 0.7250 offers a bit of resistance, an area that has been important multiple times. Any breakthrough above that respective level, the next phase of recovery will be in the radar towards 0.7350. The Australian dollar is of course very highly sensitive to the Chinese economic situation, and as a result it’s likely that the Aussie will be highly tied to whether we get some type of agreement between USA and China There have been good signs of cooperation, but once there are some type of confirmation of an agreement, the Australian dollar will take off to the upside. After all, this would be good and welcome news for the Chinese economy which has been suffering, and on the other side of the equation is the Federal Reserve which is starting to step away from the idea of a continuation of interest rate hikes. Otherwise, any breakthrough to 0.7150 underneath will bring this pair to fall to 0.70 region once again.