US stock markets advanced to new all-time highs this past week as traders maintained risk sentiment in spite of a barrage of aversion events such as Hurricane Irma, Equifax credit breach, more contempt from the North Korean regime and a terrorist attack in London. Domestically, the US government continued its struggle in tax reform while President’s perceived willingness to reach across the aisle on key issues like immigration encouraged risk sentiment. For the week, the DJIA gained 2.2%, the S&P500 gained 1.6%, and the Nasdaq gained 1.4%.
Looking ahead this week, the main focus is surely the upcoming Wednesday FOMC Interest Rate decision and the press conference that follows. Along with the rate decision, a new economic projection for the new quarter will also be released, which will be as important as the rate decision itself since any change in the long-running projections could signal Federal Reserve’s intention change in the current monetary policy; thus I would recommend scrutinizing this report closely and stay away from the market during its release time.
Let’s not forget the Press Conference with Yellen, which will be a mutable event as it unfolds. With local media members posing questions that could go in whichever direction, the market will surely be driven by this unpredictability.
Aside from the FOMC, we also have BOJ’s rate decision scheduled for the week. Although there is no definitive time set for it, thus making it untradable, rest assured that market will be driven by this event if BOJ were to surprise the market with its decision. Normally BOJ releases its rate decision between the hours of 11:00 pm to 2:00 am on September 20 ~ 21 Eastern Standard Time, as the press conference time is set at 2:30 am on the 21st.
EURUSD: In my opinion, EUR is on the verge of a breakout above the 1.2000 level, and all it needs is just another news event to drive it beyond the current range. With the USD recovering some of its losses, EUR has consolidated for a few sessions, but the overall trend remains unchanged, especially considering ECB’s current stance and the potential end to bond (asset) purchases. I would definitely be looking to buy on dip especially if the pair were to drop around the 1.1875 level.
GBPUSD: Despite the negativity surrounding Brexit negotiations and the lackluster economic figures, GBP recovered sharply and maintained its upward trend, even in the face of USD strength last week. Considering recent CPI data and the constant jawboning from BOE, I would maintain my position to BUY on the dip for GBPUSD. Right now I am more inclined to enter just below the 1.3400 area, which is a decent support on the hourly chart.
USDJPY: As a safe-haven currency, I would not expect to see continued weakness in the Yen despite the ease of tension between U.S. and North Korea. Obviously, if there were some kind of agreement to be reached in the coming days then this expectation would change, but for the short-term, I would probably be looking to sell the pair at the first sign of contempt out of Pyongyang.
USDCAD: As I have said time and again, CAD’s weakness has been over-exaggerated. It will recover with the stabilization of crude oil prices and positive economic releases. As of now, any weakness could be considered an opportunity to buy in my opinion.
USDCHF: Safe haven currency and highly manipulated one. I’d normally stay away from it due to potential central bank intervention risk.
AUDUSD: AUD has been gaining and I believe it will probably continue if USD were to remain more or less the same. I would be interested in buying on the low as long as the pair does not drop below 0.7800, because below this level we’ll have to reassess the analysis.
NZDUSD: There is one release out of New Zealand scheduled in this week’s calendar. I would probably just trade it and stay away from NZD the rest of the week unless you prefer this currency, I would rather focus on others with a bit more liquidity.
In summary, keep in mind of the major market-changing events such as the FOMC Press Conference and stay away from the market during its schedule, because even if you were on the “right side” of the market, you could still get whipsawed to smithereens.
Forex Weekly Outlook September 18 ~ 22, 2017
September 18, 2017 by 2 Comments