EUR/USD
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[li] What should we focus on next week? The FOMC meeting is scheduled for Wednesday. In the opinion of GrowthAces.com there is high likelihood that the Fed will eliminate the “considerable time” from its statement and forex traders will certainly focus on this potential change in the wording. Vice Chair Stan Fischer said this month: “It is clearer that we are closer to getting rid of that than we were a few months ago.” And he added: “It would not be appropriate for me to give you a guess as to what will happen at the next meeting”. In our opinion that was a heavy hint that a change in statement should be expected. More hawkish rhetoric of the Fed is likely to boost the USD next week.
[/li][li] Moreover, the Fed will update its medium-term economic and interest rate projections. In the opinion of GrowthAces.com the outlook for economic growth will be upgraded and for inflation will be downgraded.
[/li][li] Another important reading next week is U. S. November CPI reading on Wednesday (our forecast is 1.8% yoy vs. 1.8% yoy in the previous month). Investors will focus also on preliminary Euro zone PMIs readings (scheduled for Tuesday, 9:00 GMT) and German Ifo Index (scheduled for Thursday, 9:00 GMT). The releases are likely to show signs of recovery in the Euro zone’s economy.
[/li][li] We have got short on the EUR/USD at 1.2450 and set the target at 1.2250, which in our opinion is achievable after the Fed’s statement on Wednesday.
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GBP
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[li] GBP traders are waiting for consumer price inflation data due next Tuesday. Inflation is expected to fall to 1.2% from 1.3% a month earlier. Earlier this week BoE governor Mark Carney said that UK CPI would probably fall below 1% in the coming months. The BOE’s inflation target is 2.0%.
[/li][li] Investors will be waiting also for releases of jobs data and BOE minutes, both scheduled for Wednesday 9:30 GMT. In our opinion Weale and McCafferty were the only two dissenters, who voted for a rate hike, at latest meeting.
[/li][li] At GrowthAces.com we maintain our assessment that the GBP is likely to remain relatively strong against non-USD major currencies. We are EUR/GBP short and GBP/JPY long.
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JPY
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[li] Media projections showed Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party and its junior partner, the Komeito party, on track to win more than 317 seats in the 475-member lower house. A big victory could help Abe pursue his agenda that includes trying to carry out economic reforms and secure a trans-Pacific trade agreement. He also hopes to begin restarting some of the nation’s nuclear power plants and to expand Japan’s military role.
[/li][li] The election’s outcome is likely to be positive for shares and negative for the JPY in the near term given expectations Abe will stick to a strategy of hyper-easy monetary policy, government spending and reforms.
[/li][li] JPY investors will be also focused on Japanese business confidence (today 23:50 GMT), trade data (on Tuesday), and BOJ’s policy announcement (on Friday). The Japanese central bank is expected to remain on hold for now, but will probably reiterate its willingness to act further in 2015, if needed.
[/li][li] In the opinion of GrowthAces.com the outlook for USD/JPY remains bullish. The nearest strong resistance levels are at 119.55 (high, December 11) and 119.92 (high December 10).
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