BCR Weekly Outlook 12.10 - 12.16


Posted on: 2018-12-10 (Day) By BCR Weekly Outlook


 

Key Events for this week (10/12 – 16/12)

Time (GMT)

Country

Currency

Event

Previous

Forecast

 

Mon 10/12 09:30

GBP

UK Gross Domestic Product (GDP)

0%

0.1%

 

 

 

The UK switched to publishing monthly estimates for its GDP growth earlier in the year. The publication for September was somewhat disappointing with 0% growth. Nevertheless, Q3 saw an upbeat expansion. We will now receive the first insight into Q4 with the publication for October and the outcome will feed into the Brexit debate.

Tue 11/12 09:30

GBP

UK Jobs Report

4.1%

4.1%

 

 

 

As members of Parliament will get ready for the vote, they will have another top-tier indicator to ponder into and so will Sterling traders. Wages remain of high importance to the pound and also to the BOE. Average Earnings accelerated to 3% y/y in September, an encouraging development. The unemployment rate disappointed with a small increase to 4.1% that month. Another shortfall was seen in the Claimant Count Change, or jobless claims, for October which rose by 20.2K, above projections. We will now get fresh figures for November.

Tue 11/12 00:30

GBP

UK Parliamentary Vote on Brexit Plan

--

--

 

 

 

UK PM Theresa May reached an agreement on the withdrawal of the country from the European Union. And now, Parliament will have its “meaningful vote” on the accord. The deal ends free movement of people and secures the rights of citizens but the agreement on the “Irish backstop” is criticized by many. It ensures an open border in the Emerald Isle but ties the UK to EU regulations. Under the accord, the UK leaves the EU on March 29th, 2019, but remains in an implementation phase until at least the end of 2020. The government lost the support of the Northern Irish DUP on which it relies and many pro-Brexit members of May’s Conservative Party stated they will vote against the accord. Several opposition Labour members may support her. At the moment, it seems that the government will fail to pass the deal. In this case, the Pound may suffer quite a bit, alongside stock markets. The expectation is that the UK will then return to Brussels, achieve a few minor concessions and return for a second vote. The tweaks and the rout in financial markets would then convince members to vote for the deal. Other scenarios include the passage of the deal in the first vote, a pound-positive development that is not priced in. A third scenario is a significant defeat for the government that would clarify there is no chance for a second vote. In this case, there are growing chances of a no-deal Brexit, which would be devastating for the pound, general elections in which Labour’s Jeremy Corbyn could become PM, a second referendum, or a reversal of Brexit. In this scenario, only uncertainty and high GBP volatility are guaranteed.

Wed 12/12 13:30

USD

US Consumer Price Index (CPI)

0.3%

0.0%

 

 

 

In the recent report for October, the headline Consumer Price Index advanced by 0.3%, and Core CPI by 0.2%. While the monthly figures were OK, the year over year Core CPI decelerated to 2.1%. The Federal Reserve’s preferred inflation measure, Core PCE, consequently dropped to 1.8% y/y. The fresh CPI data for November will provide fresh input for the Fed ahead of its rate decision.

Thu 13/12 08:30

CHF

Swiss Interest Rate Decision

-0.75%

-0.75%

 

 

 

The Swiss National Bank makes its rate decision only once per quarter. The SNB shocked financial markets by abruptly dropping the peg of EUR/CHF to 1.20 back in January 2015. Since then, it left the Libor Rate unchanged at -0.75% and pledged to intervene in trade if necessary. Given the low levels of inflation, Governor Thomas Jordan and his colleagues are expected to leave the interest rate unchanged at this juncture.

Thu 13/12 12:45

EUR

ECB Interest Rate Decision

0.0%

--

 

 

 

The European Central Bank is set to end its bond-buying scheme at the end of the year. The upcoming decision will likely confirm this move. The ECB’s QE program runs at a monthly rate of €15 billion / month from October. The Frankfurt-based institution also pledged to keep interest rates at low levels through the summer of 2019. However, recent economic figures have disappointed. The German and Italian economies contracted in Q3, core inflation is not going anywhere fast, and forward-looking PMI’s are stagnant. President Mario Draghi may express some pessimism and perhaps hint that the ECB will push back the first rate hike towards the end of next year or even to 2020. The ECB will also publish fresh forecasts for growth and inflation and may downgrade some of the data points. Draghi’s tone will be critical to the reaction of the euro.

Fri 14/12 13:30

USD

US Retail Sales

0.8%

0.2%

 

 

 

The US economy is centered on consumption. Spending increased by an impressing 0.8% m/m in October while core sales advanced by 0.7%. We will now get the data for November, the month that includes Black Friday. The data also feeds into Q4 GDP and the upcoming Fed decision five days later.

 

 

 

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

 

U.S. Dollar Index (DXY)

 

Weekly OHLC              96.987             97.170             96.297             96.552

Weekly Gain/Loss       -0.45%

Key Resistance            97.700             98.050

Key Support                 95.440             94.330

 

The US Dollar Index is currently trading in a bull trend as it remains above EMA200 but the market struggled to break 97.70 key resistance as the slide continued last week to 96.297. The daily chart shows that the bulls and bears have valid arguments after the appetite for dollar decreased on Friday due to November’s disappointing US jobs report. The US jobs report indicates the Federal may hitting a pause button on rate hikes next year and this uninspiring report certainly addresses recent concerns over the US economy potentially decreasing, the overall US jobs report remains negative to the greenback and is likely to create some uncertainty over the Fed's hiking path beyond December. In technical point of view, the bulls are in trouble on the daily charts as it sustained its weakness below 97.00 handle but the the formation of the triangle on the H4 chart might increase the odds of the market to re-test previous key resistance level, 97.70. On the other hand, any breakouts to the South of the triangle on H4 chart will revoke the triangle pattern and the bears will take the lead and there will be a chance for the market to test the Key Support at 95.440.

 

 

XAUUSD (Gold)

 

Weekly OHLC              1222.01           1249.8             1221.2             1247.7

Weekly Gain/Loss       2.10%

Key Resistance            1265.9             1280.0

Key Support                 1235.0             1200.0

 

The bulls emboldened as it broke the upper trendline on the Daily chart and revoked the Bearish Symmetrical Triangle and the weakening US Dollar is the catalyst behind the strength in the gold market. The US Dollar held on the defensive as the disappointment of US jobs report and it was seen as one of the key factor that provided a goodish lift to the dollar-denominated commodity. 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 before the bears start to roar.  The market changed the main trend to up according to the weekly chart and this could trigger a follow-through to the upside.

 

 

 

More Trading Opportunities

 

EURUSD

 

Weekly OHLC              1.1341             1.1423             1.1310             1.1397

Weekly Gain/Loss       0.49%

Key Resistance            1.1430             1.1500

Key Support                 1.1300             1.1200

 

The Euro rallied during the week, but it remains in a tight range as the 1.15 handle will be a massive resistance and if it breaks above, it could free the Euro to climb higher. 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 1.1393. 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 1.11 handle and any breakouts of this level will send the market much lower.

 

 

GBPUSD

 

Weekly OHLC              1.2751             1.2839             1.2658             1.2720

Weekly Gain/Loss       -0.24%

Key Resistance            1.2920             1.3175

Key Support                 1.2700             1.2200

 

The British pound continues to drift lower overall as the formation of descending triangle in the Weekly Chart as the British Parliament continues to discuss the potential deal that Teresa May has struck with the European Union. If there is any type of agreement, the Cable will get a catalyst to drive them higher while if there is no deal, that will be extraordinary negative. The Cable is currently settling at the major support 1.27, the bottom of descending triangle. The 1.27 remains intact and any breakthrough to this level will lead the market goes down to 1.22 handle underneath based upon the size of the descending triangle. Besides ‘no deal Brexit’, as the Federal Reserve is becoming a bit dovish lately, it makes things a bit less clear and the movement might be uncertainty too. Rallies at this point are still selling opportunities based upon the downtrend line of the triangle as it remains below EMA200 as well, but if it manages to break upper trendline of the triangle, the market might go to the 1.35 handle over the longer-term.

 

 

AUDUSD

 

Weekly OHLC              0.7373             0.7393             0.7183             0.7192

Weekly Gain/Loss       -2.45%

Key Resistance            0.7381             0.7500

Key Support                 0.7200             0.7100

 

The Australian dollar fell during most of the week but found a bit of support at the same area we have seen recently the 0.72 level. The downtrend line that had been intact for so long has been broken, and it now looks as if it may offer support. This pair has broken a major downtrend channel and it is a bullish sign, this might be due to the US and China calling a bit of cease-fire in the trade war. The market seems to be choppy than anything else for the rest of the year, perhaps a slightly upward bias. The level that needs to be watched is 0.75 handle and any breakthrough this level will allow the market to go much higher and it could go as high as 0.7750 but it only could happen there is some type of serious traction in the negotiations between the US and China. If things get deteriorated, 0.70 handle will be the next key resistance and breaking down below would send this market to 0.68 handle.