In the last week, we saw a higher than expected US inflation data, an annualized rate of 5%, the highest seen in more than a quarter of a century. This data had little effect on the Forex market or the US dollar especially but did send Wallstreet higher to end the week at an all-time high closing price. The US dollar seems to have the greatest long-term strength amongst major currencies, while the Japanese yen has the most long-term fragility. The shifting inflation picture in the US may trigger a significant increase to the US Dollar as expectations of faster rate hikes are more likely to develop.
Through the weekend the G7 Meetings were taken place where are attended by finance ministers and central bankers from 7 industrialized nations – Canada, Italy, France, Germany, Japan, the UK, and the US.
The most important economic data next week will be:
On Monday, Chinese banks will be closed in observance of the Dragon Boat Festival. Also Monday, most Australian banks will be closed in observance of the Queen’s Birthday.
On Tuesday, investors will be watching the US Retail Sales, PPI, Industrial Production.
Wednesday, we have the Canadian Monthly Inflation Data (CPI), US FOMC Economic projections, funds rate and statement.
On Thursday, the Australian Employment Change and the SNB Monetary Policy Assessment will be released.
Lastly, a generally quiet Friday with only the Japan’s Monetary Policy Statement and the UK’s monthly Retail Sales.
Major Currencies Performance and Signals
EUR/USD
The euro originally tried to rally during the week but by the time we get towards the end of it, it sold off quite drastically. We expect the selling trend to continue in the next week.
FORECAST: SELL
Resistance: 1.2150, 1.2200, 1.2250
Support: 1.2100, 1.2050, 1.2000
GBP/USD
The British pound moved lower last week, and we expect the same in the next week with the eyes at the Wednesday’s US FOMC Minutes.
FORECAST: SELL
Resistance: 1.4150, 1.4200, 1.4250
Support: 1.4100, 1.4050, 1.4000
AUD/USD
In the same trend, the Aussie finished the week with a bearish trend after a ranging neutral session. We expect that next week the AUDUSD will carry on the bearish trend downwards with an US FOMC Meetings and Australian Unemployment rate release.
FORECAST: SELL
Resistance: 0.7750, 0.7800, 0.7850,
Support: 0.7700, 0.7650, 0.7600
USD/JPY
The US dollar rallied last week as with most USD pairs. This week we expect the trend to continue upwards with a care to the Wednesday’s US FOMC and the Friday’s Japan’s Monetary Policy Statement.
FORECAST: BUY
Resistance: 110.00, 110.50, 111.00
Support: 109.50, 109.00, 108.50
USD/CAD
The Loonie rallied significantly against the Canadian dollar during the week, breaching above the key 1.2150 price level. We expect a bearish pullback and range bounding after that between 1.2200 and 1.2150 range.
FORECAST: NEUTRAL
Resistance: 1.2200, 1.2250, 1.2300
Support: 1.2150, 1.2100, 1.2050
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