The past week has been one of moving consensus towards inflation and central bank outlooks, particularly the Federal Reserve. The renomination of Fed chair Jerome Powell – a relatively less dovish choice compared to Lael Brainard (now also the vice-chair pick) – saw equities trading lower at the start of week.
Worldwide manufacturing and services PMIs will be released next week for a detailed look into November economic conditions. The Christmas month of December will also bring the US jobs report for November and eurozone inflation data, all of which will be watched closely for central bank policy guidance.
That changed ahead of the Thanksgiving holidays, whereby data, including the IHS Markit Flash US Composite PMI revealed a steady recovery of the US economy. Details from the November Fed FOMC minutes meanwhile pointed to mixed views on inflation but hinted at a preparedness to raise rates “sooner than participants currently anticipated” if warranted by the data, therefore placing additional focus on the week’s upcoming employment report, another of the Fed’s highly watched gauges.
The inflation situation meanwhile also runs hot in the eurozone, as indicated by the flash PMI data and the key emphasis for the union will therefore be on the flash HICP inflation reading.
Asian economies will see November PMIs, including for China, offering clues on the growth and inflation balance. Meanwhile Australia and India release GDP figures for the July to September period.
Next week there is an abundance of economic data released with the most important the Australian and Canadian GDP data on Wednesday and Tuesday respectively, US services and manufacturing data on Wednesday and finally the Canadian and US NFP Payrolls on Friday.
Major Currencies Performance and Signals
EUR/USD
The Euro bounced back last week after consecutive losses. We remain short in the EUR pair with eyes always on the NFP number.
FORECAST: SELL
Resistance: 1.1350, 1.1400, 1.1450
Support: 1.1300, 1.1250, 1.1200
GBP/USD
The British pound rate ended the week in negative territory after a modest rebound on Friday. On renewed fears of Coronavirus, the markets are reassessing BoE and Fed rate hike forecasts. The Cable needs to break through 1.3450 to attract more buyers.
FORECAST: SELL
Resistance: 1.3400, 1.3450, 1.3500
Support: 1.3300, 1.3250, 1.3200
AUD/USD
Australian Q3 GDP mid-week is expected to show weakness, although it will be largely ignored as the Victoria and NSW reopening in Q4 should see a rapid bounce in GDP. We remain bearish on the Aussie.
FORECAST: SELL
Resistance: 0.7200, 0.7250, 0.7300
Support: 0.7100, 0.7050, 0.7000
USD/JPY
The US dollar initially rallied last week but had a brutal Friday session. This was in reaction to the negativity coming out of South Africa, and the possibility of further lockdowns. The main driver for the next week will be the NFP.
FORECAST: NEUTRAL
Resistance: 113.50, 114.50, 115.00
USD/CAD
The Loonie broke the 1.2750 price on the upside and seems that next week the trend will continue the bullish side. Now it’s up to the NFP next week to stir up volatility but we remain bullish.
FORECAST: BUY
Resistance: 1.2800, 1.2850, 1.2900
Support: 1.2750, 1.2700, 1.2650
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