Weekly Outlook: Jul 25 - 28; Fed Policy Meeting in Radar

Last week, the U.S. dollar surged against all its G10 counterparts, recording the fifth consecutive positive week against the basket of major currencies. The U.S. labour market is continuously improving and the housing market expands. Euro has been traded mixed as ECB postponed further stimulus actions until they have a clearer picture of the post-Brexit situation. A heavy economic calendar this week with Fed and BoJ interest rate decisions, multiple speeches and other significant data coming out.


Early on Monday, we start the week with the RBNZ Governor Wheeler speech. A while later the German IFO survey will release its indices for business climate, current assessment, and expectations for July. In New Zealand, the imports, exports and trade balance for June are scheduled for publication.

On Tuesday morning, the UK BBA mortgage approvals in June is coming out and I would expect it to be more than analysts forecast according to the sharp rise in the existing home sales and the building permits in June. The analysts expect 40.2k mortgage approvals versus 42.2k the month before.

Going to U.S., the Case-Shiller home prices indices will be published. The flash Markit services PMI is expected to complete the composite PMI index for June. A significant decrease in July’s consumer confidence is predicted, probably on the back of the U.S. political instability. Meanwhile, the new home sales are forecasted to remain stable at 560k in June versus a decline of 0.6% the previous month.
During the Asian session, the Australian final inflation rate for the Q2 will be closely watched. Quarterly, a rise of 0.4% from a slip of 0.2% before while annually, the analysts expect an increase of 1.1% versus 1.3% before.

Wednesday will be a volatile day for GBP and USD currency pairs. In UK, the GDP estimate for the second quarter is expected to show a steeper growth than before. Annually, the GDP is forecasted to have risen 2.1% in Q2 versus 2.0% before and quarterly 0.5% versus 0.4% before.


A few hours later, traders’ attention will turn to U.S. where the Fed interest rate decision will take place a while after the domestic durable goods orders. The market consensus for the durable goods orders suggests a drop of 1.5% in June smaller than last month’s decrease of 2.3%. At 18:00 GMT time, Fed will announce its interest rate decision. No changes are expected this time, however, the policy statement after the two-day meeting could shed light on officials thinking for September and beyond. The most recent released indicators show increased confidence as the labour market is getting stronger, wage growth picks up and the financial market stabilized compared to the post-Brexit period.


During the night, the Bank of Japan Governor Kuroda will give a press conference and we must be cautious at JPY crosses trades as the market tends to be volatile on Kuroda comments. However, I wouldn’t expect him to change his view expressed in his last speech that there is no need for further economic stimulus.

On Thursday morning, the German unemployment rate is coming out. In Euro area, various sentiment indicators for consumers, businesses, industrial, services and economy will be released. Later on, the German flash inflation rate for July will be announced. The U.S. weekly jobless claims and the goods trade balance for June will be released. The New Zealand the building permits for June and the Gfk consumer confidence for July will be released. Going to Japan, both the unemployment rate and the inflation rate are expected to remain unchanged at 3.2% and -0.4% respectively in June. The preliminary industrial production and retail sales are also expected to come out. A while later the Bank of Japan will announce its interest rate decision followed by the monetary policy statement that will be closely watched. In addition, the Bank of Japan will publish its semiannual economic outlook report.

On Friday, the UK mortgage approvals for June are expected to have decreased slightly at 65.65k in June versus 67.00k before. Eurozone’s flash GDP for Q2 is forecasted to have grown 1.6% from 1.7% the previous quarter. No changes are expected to the unemployment rate for June from the current 10.1% and to 0.1% inflation rate compared to last June.


The U.S. flash GDP for Q2 is expected to grow at a sharply steeper pace at 2.6% than 1.1% before quarterly. On the second half of the trading day, the FOMC Member Williams will give a speech.

The EUR/USD pair edged lower for second consecutive day, falling down to 1.0950 price level and penetrated the one-month trading range to the downside. Last week during the ECB meeting the pair failed to impress and dropped to 1.0980 price level. The common currency plunged 0.05% the last two days and now is trading between the significant area at 1.0950 – 1.0970.

From the technical point view, on the daily chart, the pair fell to a fresh one-month low and further downside pressure is expected. A successful break below the 1.0950 support level will open the way for the 1.0910 price level or furthermore for the 1.0820 barrier. On the other hand, the price may continue its upside potential move until the 1.1085 resistance level. The price is moving well below from the three SMAs (200-SMA, 100-SMA, 50-SMA) and the technical indicators are still moving in a negative territory. The MACD oscillator has a stronger momentum than the previous days and is crossing its trigger line to the downside. The RSI indicator is falling and is approaching the 30 level.