Last week, a strong dollar has been a hot topic since the software giant Microsoft and Salesforce Inc. CRM, pointed to challenges the currency is causing for earnings. It’s been identified in other industries too, including by Pfizer Inc., eBay Inc., and MasterCard since foreign sales can be hurt by a US Dollar.
A strong US dollar will make it more expensive for American companies to sell their goods on the international market, which hurts the stock market. But cheaper imports from a robust dollar help US consumers, the driving force of the economy, particularly as households face high costs for gas, groceries and more.
The European Central Bank is set to flag its first-rate hike in more than a decade this week, while the Reserve Bank of Australia might step on the brakes harder. But as the laggards of the central bank world finally get their stakes on when it comes to tightening policy, investors will be on the lookout for more evidence that inflation may already be peaking in the United States.
Next week on the economic data front it is expected to be a quiet week with some important news coming out of Europe, Australia, and the US.
On Monday, the market will be quiet as German, French, Swiss and New Zealand banks will be on holidays. Tuesday most important figure will be the Australian RBA Rate Statement. On Thursday the ECB interest rate decision will be made with the markets expecting the ECB to leave rates unchanged, the focus will be on ECB President Christine Lagarde and the press conference. Lastly, on Friday the Canadian Employment Change and the US CPI numbers will take center stage.
EUR/USD
In the previous week, the EUR rallied by 1.62% to $1.0735. A quiet week ahead but expected to be impactful on Thursday where the Monetary Policy Statement will be expected to hike. We expect the pair to be bearish.
FORECAST: SELL
Resistance: 1.0750, 1.0700, 1.0750
Support: 1.0700, 1.0650, 1.0600
GBP/USD
The British Pound rose by 1.21% to $1.263 in the week prior. BRC Retail Sales Monitor numbers for May are due out on Tuesday along with finalized private sector PMIs. Any revisions to the services PMI will have the greatest impact on the Pound. We expect the pair to be bearish.
FORECAST: SELL
Resistance: 1.2500, 1.2550, 1.2650
Support: 1.2450, 1.2400, 1.2350
AUD/USD
This week, the main event will be the RBA’s June monetary policy decision on Tuesday. The markets are expecting a 25-basis point hike. Anything more and a hawkish rate statement would support an Aussie Dollar breakout. We are NEUTRAL on the pair.
FORECAST: NEUTRAL
Resistance: 0.7250, 0.7300, 0.7350
Support: 0.7200, 0.7150, 0.7100
USD/JPY
Last week, the US Dollar appreciated further vs the Yen as the greenback was strengthened. On Tuesday, household spending will draw interest ahead of first quarter GDP numbers due out on Wednesday. We are bullish on the pair.
FORECAST: BUY
Resistance: 131.00, 131.50, 132.00,
Support: 130.50, 130.00, 129.50
USD/CAD
For the Loonie, the main event, will be the employment figures for May. We expect the pair to continue its bearish trend.
FORECAST: SELL
Resistance1.2600, 1.2650, 1.2700
Support: 1.2550, 1.2500, 1.2450
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