BCR Weekly Outlook (04 February 2019)


Posted on: 2019-02-04 (Day) By BCR Weekly Outlook


 

Key Events for this week (04/02 – 08/02)

Time (GMT)

Country

Currency

Event

Previous

Forecast

 

Tue 05/02 03:30

AUD

Australian rate decision

1.5%

1.5%

 

 

 

The Reserve Bank of Australia makes its first rate decision of the year after enjoying a summer vacation in January. The Canberra-based institution has not changed since mid-2016. Officials have said that the next move will likely be up rather than down, but they are firmly neutral. No change is expected now, but since the last meeting, the global picture has worsened. It will be interesting to hear the opinions of Phillip Lowe and his colleagues about Chinese demand, the stuttering housing sector, and the local job market, which is doing quite well. Any hints about changes in rates may impact the Aussie.

Tue 05/02 15:00

USD

ISM Non-Manufacturing PMI

58

57

 

 

 

The services sector report, like the manufacturing one, is published after the Non-Farm Payrolls and has its own time in the sun. The figure came out at 57.6 points in December, below expectations. The worsening global picture and the US government shutdown may drag it down this time. The indicator is a forward-looking one. A score of 57 is expected.

Wed 06/02 21:45

NZD

New Zealand jobs report

1.1%

0.3%

 

 

 

New Zealand publishes its employment report only once per quarter, making a substantial splash on each publication. The third quarter of 2018 was excellent, with an increase of 1.1% in overall employment and a drop in the unemployment rate to 3.9%. A more modest increase in employment is likely this time: 0.3% is projected. A jobless rate of 4.1% is on the cards.

Thu 07/02 12:00

GBP

UK rate decision

0.75%

0.75%

 

 

 

In addition to the regular rate decision and meeting minutes, this is a “Super Thursday” in which the Bank of England also publishes its Quarterly Inflation Report. Governor Mark Carney holds a press conference after the event. The growing uncertainty around Brexit overshadows everything. The BOE would have raised rates from the current level of 0.75% had the Brexit issue been resolved. Real wages are on the rise and accelerating, jobs are aplenty, and inflation is above 2%. However, if the UK leaves without a deal, the economy could plunge, even if it does not suffer the BOE’s most adverse scenario. No change is expected in the policy and the vote in the Monetary Policy Committee will likely be unanimous: all nine in favor of making no change. The QIR has projections for inflation and growth. So far, the BOE assumed a smooth Brexit. Is it still the case? The hot topic will likely dominate the press conference. Carney may maintain the optimistic assumptions but could surprise with revelations on the preparations for a no-deal Brexit.

Fri 08/02 13:30

CAD

Canadian jobs report

9.3K

---

 

 

 

Canada’s jobs report is published on a different Friday than the US one, allowing USD/CAD to move solely on the outcome. Canada ended the year with a modest increase in jobs: 9.3K after a surge of 94.1K in October. The unemployment rate surprised by staying at 5.6% instead of an expected rise. We may see similar numbers now.

 

 

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

 

U.S. Dollar Index (DXY)

 

Weekly OHLC              95.417             95.685             94.865             95.292

Weekly Gain/Loss       -0.13%

Key Resistance            96.500             97.000

Key Support                 95.000             94.000

 

The US Dollar weakened for the past two weeks but it managed to give a little bouncing on EMA200 in the Daily Chart to give the bulls some fresh air to breathe. The US Dollar index settled at 95.292. It is currently moving in the ascending channel and the possibility for US Dollar to get stronger is high. In addition, this week investors will get the chance to hear remarks by a number of Federal Reserve officials after the U.S. central bank caught markets off guard by putting plans for further rate hikes on hold and pledging to be "patient" on further moves. Investors will also be looking ahead to President Donald Trump’s State of the Union address on Tuesday. The speech was initially scheduled for Jan. 29, but was delayed as a result of the temporary government shutdown. In the Weekly chart, the rejections were discerned vividly and it is likely to climb supported by EMA200 in the Daily Chart and lower trend-line of the ascending channel. It could be the signs of another upside attempt by the Bulls towards 96.50 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 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              1299.89           1326.15           1297.52           1316.98

Weekly Gain/Loss       1.31%

Key Resistance            1325.00           1350.00

Key Support                 1300.00           1280.00

 

Gold markets rallied significantly during the week, slamming into the $1325 level, an area that has been important more than once. This is an area where we had seen a lot of selling in the past. This is an area that has seen a major break down, and the beginning of a major selloff that reached down towards the $1200 level. Now that the gold price has returned to this area, it should not be much of a surprise that it has struggled to break above it and a short-term pullback is necessary at this point. The pullback is probably necessary to build up the momentum considering that it had surged to this level so rapidly after the Federal Reserve suggested that perhaps they are going to be a bit more hesitant when it comes to rate increases, and of course running off the balance sheet. Because of this, it is negative for the US dollar, so longer-term that should send Gold higher by proxy. That being said, the $1300 level underneath is going to offer plenty of support and it would be very interested in buying this market in that area. The alternate scenario is that we break above the $1340 level, which should send this market looking for $1350 initially, and then perhaps even $1400 longer-term. Overall, it is bullish momentum, but the momentum building is probably going to be necessary.

 

 

More Trading Opportunities

 

EURUSD

 

Weekly OHLC              1.14120           1.15132           1.13896           1.14539

Weekly Gain/Loss       0.37%

Key Resistance            1.1550             1.1600

Key Support                 1.1350             1.1300

 

The Euro rallied a bit during the trading session on Friday, reaching towards the 1.15 level above. That’s an area that has been resistive more than once, and therefore it’s not a huge surprise to see that this market can get above there. The EMA200 above offers quite a bit of resistance, so if it manages to break above there it would be a huge signal to start buying. Overall though, the market will accomplish that, perhaps reaching towards the 1.18 level longer-term. This is a market that is going to continue to be very sloppy and difficult though, as the Federal Reserve has stepped back and kept itself out of the picture. On the other side of the Atlantic Ocean, the ECB is in a difficult position as the European Union is starting to post rather negative economic numbers, with Italy entering a technical recession this week. It is because of this that the pair is struggling to pick up momentum, eventually something will push it higher. Quite frankly, this is one of the least interesting Forex pairs to trade right now, but it is trying to form a major base to turn the trend around longer term and these tend to take quite some time though.

 

 

GBPUSD

 

Weekly OHLC              1.32069           1.33079           1.30420           1.30753

Weekly Gain/Loss       -0.10%

Key Resistance            1.32200           1.33300

Key Support                 1.3000             1.2950

 

The Cable initially fell during trading on Friday but seems to be finding plenty of support near the EMA200, and of course the previous downtrend line. At this point, the market looks very likely to continue to try to grind to the upside, perhaps reaching towards 1.33 level, and then beyond that to the 1.35 level. As long as long as it stays above the 1.30 level, it’s likely that this market continues to find value hunters. The markets have recently made a major move to the upside, and that short-term pullback is starting to look a bit more like a pennant, or if nothing else a simple retest of previous resistance. The Cable is heading close to a decision on the Brexit, and as soon as it gets any type of clarity the British pound should continue to attract attention. Ultimately, the market will look back at this time frame as when the ability to change the trend is found. Shorting the British pound is no longer favorable but the occasional headlines could stop out a position. It’s going to be a long and painful process, but the British pound has finally turned the corner longer-term.

 

 

AUDUSD

 

Weekly OHLC              0.71771           0.72944           0.71373           0.72470

Weekly Gain/Loss       0.97%

Key Resistance            0.72800                       0.74000

Key Support                 0.72300                       0.72000

 

The Australian dollar has gone back and forth during the trading session on Friday, after the Americans released a jobs figure of an additional 300,000 for the month of January. That is dollar positive in theory, but it also helps the Australian dollar as it is a risk currency. That being said, the market is sitting directly at the EMA200, which of course attracts a lot of attention from systematic trend following trader’s. Looking at this chart, it’s obvious that the 0.7250 level has been important in the past, and the massive hammer that we see below is probably going to be looked at as the “bottom” in this market. Short-term pullbacks will offer buying opportunities and this isn’t to say that it will get the occasional sharp pullback. However, it’s obvious that a lot of buyers come in and push to the upside. Overall, the pair is simply waiting on some type of resolution to the US/China trade issues. If it can ever get that sorted out, this pair should take off to the upside. Shorting this pair is not favorable for now, because it hits such historical low pricing that it’s going to be difficult to grind any lower longer term.