Last week’s Forex market was slow ahead to Friday’s release of US inflation data, which was expected to be the key driver of market movements for the week. Nevertheless, the data came nearly completely in line with the forecast consensus, and the market did not respond very strongly to it. This meant the week ended silently with low price volatility.
Despite the long-term bullish trend, the US Dollar fell a bit during the week, and it also fell after the US inflation data were released. The inflation data showed that annualized US inflation is now increasing at a rate of 6.8%, the highest seen since 1982. Though, the rate of the increase decreased, with the latest month’s growth coming in at only 0.8% versus 0.9% in the previous month. Maybe that the small decrease in the rate of the increase was seen substantial to prevent panic over inflation.
Most global stock markets soared last week, as did the Australian and Canadian dollars which are commodity currencies and key risk indicators. The Central Banks of Australia and Canada held their respective interest rates and monetary policies steady in their monthly policy releases during the week. This had little effect on either currency, both of which grew firmly.
Next week investors expect a higher amount of volatility due to a hectic economic calendar, with the momentum likely to be decided partly by the upcoming FOMC release and partly by how dangerous the omicron variant is shown to be as more tests are performed on it. The coming week’s major scheduled economic releases will be:
- The FOMC statement, federal funds rate, and economic projections.
- Monthly policy releases from the ECB, the Bank of England, and the Swiss National Bank.
- UK and Canadian Consumer Price Index inflation data.
- Australian employment data and New Zealand GDP data.
- US retail sales and PPI data.
- German manufacturing and services PMI data.
Major Currencies Performance and Signals
EUR/USD
The EURUSD pair has been trading within a range last week between the 1.135 and 1.125 support lines. Next week we expect the volatility to pick up but still be in a range. The Fed and ECB are likely to take opposing sides at next week’s meeting so Wednesday and Thursday meetings are important for traders.
FORECAST: NEUTRAL
Resistance: 1.1350, 1.1400, 1.1450
Support: 1.1300, 1.1250, 1.1200
GBP/USD
The British Pound has been one of the world’s weakest currencies after the BoE didn’t hike rates in early-November. Next week brings several critical items on the economic calendar for both the UK and the US, and this can certainly provide that motivation on either side of the matter.
FORECAST: NEUTRAL
Resistance: 1.3300, 1.3350, 1.3400
Support: 1.3250, 1.3200, 1.3150
AUD/USD
The Aussie Dollar ended the week with a significant pullback after reaching a yearly low a 0.6995. We expect this week for the bearish momentum to continue.
FORECAST: SELL
Resistance: 0.7200, 0.7250, 0.7300
Support: 0.7150, 0.7100, 0.7050
USD/JPY
The US dollar improved a bit during the last trading week but still struggles near the 114.00 level. I think at this point the pair is going to slow down as we move into the end of the year situation when traders simply step away from the market.
FORECAST: NEUTRAL
Resistance: 113.50, 114.50, 115.00
Support: 113.00, 112.50, 112.00,
USD/CAD
The Loonie ended the week up struggling to end the bearish trend. This week is expected for the Loonie to go down as the Canadian currency is recovering.
FORECAST: BUY
Resistance: 1.2750, 1.2900, 1.2950
Support: 1.2800, 1.2750, 1.2700
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