This week is a shortened week with U.S. Independence Day on Tuesday, therefore we are likely to see thinner liquidity conditions towards the early part of the week, but activities should start to pickup at the end of the week, especially considering that both ISM PMIs, ADP NFP report, and the Nonfarm Payroll Report have all managed to be packed into this week.
Week Review (How we arrived here)
Global market has been refocusing back on Interest Rate and Central Bank policies after central bankers express their view on economy and inflation, and most notably, BOE’s Carney commented on “will debate issues around raising rates in coming months” and ECB’s Draghi on current inflation readings are driven by temporary factors, which implies that the Central Bank is is hawkish despite of last meeting’s dovish tone, and as a result, both Euro and Pound shot through the roof and are still climbing even into this week.
In the commodities front, Crude went on a 7-day winning streak by adding about 6.5% for the week, and the U.S. stock indices all ended up in red, with DJIA dropping 0.2%, S&P down 0.6%, and the Nasdaq lost 2.0%. Obviously with EUR, GBP, and Crude Oil all gaining, the USD ended up much weaker for the week.
EURUSD: As far as the combined currency is concerned, even with Draghi and his second in command Vitor Constancio clarifying that the market mistook Draghi’s comment, market still managed to push the Euro stronger. I think EUR will continue to rise unless we get hit with a strong negative surprise, and in the absence of such surprise, I’d continue to go LONG on EUR.
GBPUSD: BOE is the ultimate authority on their currency so if Carney wants to see a strong GBP, all he has to do is what he did last week, talking about the possibility of a “debate” on raising rates. Apparently the market likes it, so we are going to see plenty of buyers for GBP and we are not going to go against that. BUY on dip, around 1.2850?
USDCAD: Employment change is scheduled on Friday and it will be a major release for this currency. I’d not go against CAD in the short-term partly because it has depreciated so much in the last 12 months and the other part being how stable Crude Oil prices have been rising. I would definitely look to SELL on Rally for this pair.
USDCHF: As usual, I recommend to stay out.
USDJPY: Abe suffered a defeat this weekend so it means there could be some policy change and potentially a snap election. Any sort of political instability is generally not good for the currency, but since we have also a weaker USD, it is now a tale between two weak currencies getting weaker. So my money is still on USD and I’d still go LONG on USDJPY. Obviously you can reap more reward by going long on EURJPY or GBPJPY.
AUDUSD: RBA will probably not change their policies in the short-term, so my view still remains unchanged, that is to BUY on dip. If we get a drop below 0.7600, it may be a good buy.
NZDUSD: NZD is looking better than the AUD and I would buy on dip whenever possible. I believe New Zealand’s economy is probably more stable than most and likely to continue its upward trend. As of right now, a 0.7175 entry for BUY would be ideal.
Forex Weekly Outlook July 3 ~ 7, 2017
July 3, 2017 by Leave a Comment