The past week was a busy week as far as breaking events are concerned, with Saudi’s action against Qatar, U.S. former FBI director Comey’s testimony, terror attack in London and its aftermaths, plus a surprising UK election that resulted in an hung Parliament, are all events that may or may not have direct influence on the Forex market (except GBP), but all have the potential of changing risk sentiment, at least for the short-term.
However, we did see risk on sentiment towards late week, not only the volatility index VIX dropped to a decade low, US stock indices recovered somewhat and ended the week in mixed territories, with DJIA at +0.3%, S&P at -0.3%, and Nasdaq ending the worst out the 3, at -1.6% of loss… This is of course, due to the comments by Goldman Sachs that Tech stocks are overcrowded…
Looking ahead this week, with obvious focus on the Fed rate decision on Wednesday. Although the majority of the market has already priced in this hike, there are still some doubters citing the dovish tone from last meeting and pointing their fingers at the lack of both wage inflation and inflationary pressures. Most likely we’ll see a rate hike this week (read my analysis) but with the market already priced in this move, where the USD is going to go from here is anyone’s guess… Likely if we get a strong hawkish tone out of Yellen during the press conference, market will take that as a positive sign and we may see USD continue to move up… On the opposite end of the spectrum, USD could drop off and considering recent gains in the greenback, there are plenty of rooms for it to go.
EURUSD: With the ECB remaining a bit dovish (last week’s ECB meeting), evidenced by the weakness in Euro after the meeting, we are not really expecting a sudden shift in tone by the ECB as Draghi carefully orchestrated his answer and pointed to further rate accommodations if needed, market is now at neutral if you ask for my opinion. However, the overall sentiment for the Euro has improved over the past 6 months, and I would not deviate from buy on dip as a trend change is coming. I would be looking to position a buy trade below the 1.1150 level and potentially carry it over to the 1.1300 and beyond.
GBPUSD: Post UK elections market has not been merciful for the Sterling and the GBPUSD is now heading lower. The combination of political instability, terrorist incidents, plus downright negative economic indicators are not sitting well for Forex traders. I would not be buying the GBP at this time, as a matter of fact, I might even avoid it all together since I don’t know what the market would do. If I have to be in a trade with GBP, I would be selling it this week.
USDJPY: Since we do have that BOJ rate decision on late Thursday/early Friday, market is going to be waiting for that to be over before decisively push the currency. It is still a risk aversion driven market as of the start of the week, I would be careful about placing my BUY trades of the pair until I can see a bit more positive news. From a longer term point of view, I would BUY on dip, but the entry would have to be as close to the recent lows as possible, around the 109.00 level, just to be safe.
USDCAD: Crude Oil has not been trending thus very little indication for the direction of USDCAD. However, I would not be surprised to see further strengthening of the CAD (USDCAD drop) in the future as Crude Oil prices rise. As of now, I would be looking to opportunistically SELL USDCAD on strong rallies because I just cannot see further rise of the pair considering recent market landscape, knowing that the US has its own set of issues as well.
USDCHF: I would stay away from this pair for the time being.
AUDUSD: China’s economic situation has been improving thus adding optimistic outlook for the AUD. With RBA not giving us a directional bias in either direction, I believe AUDUSD is going to remain in this 200 pips range, and the problem is that it is right now sitting in the middle of that range. So stay out unless we see a push in either direction and my long-term bias is to BUY on dip.
NZDUSD: BUY on dip if you see a dip. I would be interested to take a trade if the pair were to drop below the 0.7100 area. Anything short of that is just not safe.
Like I said before, we do have plenty of high impact releases scheduled for the week, but there are 4 high impact ones that we are going to pay more attentions to, and they are:
Out of the 4, only 2 are tradable, so go ahead and read my trade plans for those.
Note the time for those releases and stay out of the market or get ready to trade the news… At any rate, don’t hold any trades going into those releases!
Forex Weekly Outlook For June 11 ~ 16, 2017
June 12, 2017 by 1 Comment