Equity indices in the U.S. faced a sharp sell-off pressure as global markets succumbed to risk aversion due to the increasingly hostile rhetoric between President Trump and North Korea. European markets were equally devastated by the sell-off, with the Stoxx 600 headed for its worst week since November.
Safe haven currencies like the yen and Swiss franc rose; USD although also considered a safe-haven currencies, drop sharply and reached 12-months lows once again, but unsurprisingly, gold shot up to a two-month high (let’s not forget Bitcoin).
Although situation in the U.S. rebounded towards the mid-end of the week on the back of another record high in the US JOLTS job openings data, the sell-off resumed its course after the release of PPI at lower than expected numbers, Fed’s Dudley cautious remarks, and the fact CPI data on Friday came in below consensus, all resulted in diminishing a Fed December rate hike probability; which at the present time, it is at about 40% odds. For the week, the DJIA lost 1.1%, the S&P500 dropped 1.4%, and the Nasdaq dipped 1.5%
EURUSD: EUR is likely to remain well supported but a rebound in the USD is highly likely with the ease of tension between North Korea and the U.S. I would still be looking to BUY EURUSD on dip, but the entry will have to be supported by some strong support levels as market usually tends to over-exaggerate, so I will be patient with my entries.
GBPUSD: Similarly to the EUR, GBP is also likely to consolidate its gains as tension eases from an imminent war with the north. However, I would use more caution with the Sterling as UK has plenty of issues of their own; ultimately it is still a buy on rally and I believe perhaps GBPJPY might be a better buy.
NZDUSD: NZD’s fundamental is actually looking good, but unfortunately we will see some consolidation this week, but I would be open to buy on dip especially if the pair drops towards the 0.7175 level.
USDCHF: I would stay away from this pair this week.
USDCAD: I would expect to see an opportunity to sell into the pair as the stabilization of crude prices will push CAD more into the fundamental light rather than driven by commodities. I would really prefer a sell above the 1.3000, but realistically anything above the 1.2900 is a good sell.
AUDUSD: AUD really enjoyed a long-run on the back of USD weakness, whether or not it can keep its gains still remains to be seen, and I will be waiting for a decent drop before committing to a buy trade, preferably around the 0.7600 level.
USDJPY: This is probably the best looking trade to buy on dip as JPY has strengthened exclusive on the back of safe-have demands, and without further exacerbation, I believe USDJPY could go as high as the 115.00 in no time…
The above recommendation is based on the market situation at the moment of writing this article. Fundamental changes very often and it is important to pay close attention to any high impact releases and follow them, even if they are not tradable.
This week’s main focus is the US Core Retail Sales, and a stronger figure could change the entire market landscape, so I’ll pay close attention to it.
Forex Weekly Outlook August 14 ~ 18, 2017
August 14, 2017 by Leave a Comment