Forex Weekly Outlook May 22 ~ 26, 2017

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We’ve got just 3 tradable releases scheduled this week, but these 3 releases have the potential of changing the entire market landscape, so my recommendation is to schedule your tradings around it, or at least be aware of them and either move with the trend or stay out of the way!

Aside from Bank of Canada’s rate decision, the other two GDP releases are considered lesser impact due to being second releases for the same quarter. As data starts to come in, second and third releases are less and less likely to surprise the market, thus less tradable, but I’ve seem some very interesting market reactions to these releases, so don’t discount them entirely just yet.

Table of Contents

Previous Week Summary

Market started out with optimism and risk appetite was running at full steam, with OPEC continue with their production cut rhetoric and China committing to do more for its economy, but things turned to a sour note as the firing of FBI director Comey by President Trump sparked a fresh round of uncertainty. Vix went up 27% and USD dropped miserable against all other currencies. For the equity market, Dow, S&P, and Nasdaq all dropped about 0.5%…

Market Sentiment

EURUSD 74% SHORT
USDJPY 59% LONG
GBPUSD 60% SHORT

Trading Week Ahead

We’ve got plenty of potential market moving events scheduled. Although only 3 reports are considered tradable, we should still pay close attention to the following as they can change market sentiment if we were to get huge surprises.

On Tue May 23, we have the German Ifo Business Climate report at 4:00am, which is not usually a mover but if we were to get a strong surprise, market could move drastically during the European session. Then at 5:00am UK’s Inflation Report hearing will kick off, since it is a combination of testimonies and Q&A, I would not be trading GBP today just to be on the safe side. Then moving into the US session there are numerous reports out of US with New Home Sales, Richmond Manufacturing, Flash PMIs, and a Fed president Kashkari’s press conference, which could drive the market so watch out.

On Wed May 24, aside from BOC, we’ve got FOMC minutes in the afternoon and Existing Home Sales at 10:00am. Just stay out of the market during those times and wait for trading opportunities, and this is especially true in the afternoon with FOMC minutes as lower liquidity and market surprise is not a good combination.

Nothing really to watch out for on Thursday and Friday, except for the tradable releases… Of course, pay close attention to our Market Cycle sheet and learn to take advantage of it.

Currency Outlook

EURUSD: I would probably looking to BUY EURUSD on dip as recent orders are stacked against a drop. I would be interested in picking it up around the 1.1160 ~ 1.1100 area as those levels are considered decent support for the currency. With Fundamentals pointing to a recovering euro, if this week’s German Ifo were to disappoint, we could definitely get that opportunity to jump in.

GBPUSD: Pound has been trading in an 150 pips range for quite a while now and again unable to breach current range. It is still a BUY on dip in my book, especially seeing how the market has become indifferent to negative news out of UK. It is what I call “Brexit Fatigue” as traders no longer give a rat’s ass about it. So if we see a dip around the 1.2950 ~ 1.2875, I believe it could be ideal for a BUY with the current top 1.3030 for target.

USDJPY: We’ve seen consolidation due politics last week (firing of Comey), but ultimately I would still be looking to go LONG on the pair due to both US and Japan fundamental outlooks. More specifically, with the USD remaining well supported and JPY continue to ease under Abe, I could see 115.00 being tested again. Ideally I’m looking around the 110.30 area for entry, with 109.50 as my ultimate stop.

Thanks,

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